Linn Energy signed a $1bn equity deal with private investor Quantum Energy to fund acquisitions and pay for the development of oil and gas assets.
Under the agreement, Linn will be able to own a working interest ranging from 15pc to 50pc in the acquired assets. The assets under the venture will be managed by Linn and if the partnership decides to sell any of them, Linn will have the first right to acquire them. The deal allows Linn "to capture acquisition opportunities during distressed market conditions," it said.
A 50pc drop in crude prices since June is forcing producers to find ways to fund operations, repay debt and offset the squeeze in cash flow. In addition to making steep cuts to their capital expenditures, companies are issuing new shares and selling assets.
Some independents, like Linn, Antero and Concho, are also looking to snap up distressed assets to position themselves for a recovery. Linn said acquisition and development funds may exceed $2.5bn.
The agreement comes on the heels of a deal Linn signed with GSO Capital Partners, a unit of the Blackstone Group, for up to $500mn over five years to fund drilling programs. As per that January deal, GSO will fund 100pc of the cost and will own 85pc stake in these projects until they achieve a 15pc rate of return, with Linn holding the remaining. Once that rate of return is achieved, GSO's interest will fall to 5pc while Linn's will increase to 95pc.
Whiting Petroleum earlier this week issued 35mn shares, which would raise $1.3bn-1.4bn at current share prices. The company last year agreed to take over Bakken peer Kodiak for $3.8bn, to become the biggest producer in North Dakota. But the deal left Whiting with $2.2bn of Kodiak debt and more than doubled Whiting's long-term debt to $5.6bn last year. By the time the deal closed in December, oil had plunged to near six-year lows, stoking market talk of the company being up for sale.
"This deal likely puts to bed rumors about Whiting being bought out," analysts at Tudor Pickering Holt said today.
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