Linn Energy to acquire BP’s natural gas assets in Kansas for $1.2 billion

Linn Energy, a US-based independent oil and natural gas development company, yesterday agreed to acquire natural gas properties in southwest Kansas from British oil giant BP Plc, for $1.2 billion.

The deal includes liquids-rich production of approximately 110 MMcfe/d, proven reserves of 730 billion cubic feet. Linn said that about 63 per cent of the output is gas and the remainder is natural-gas liquids.

The gas properties have 2,400 operated wells in more than 600,000 contiguous net acres, and the deal also includes the 100 per cent ownership of the Jayhawk Natural Gas Processing Plant, with significant excess capacity.

Houston-based Linn said that in line with its strategy to hedge production associated with acquisitions, it has entered into hedging contracts for the entire natural gas production of the acquisition through 2016 and 68 per cent of natural gas liquids production.

The company said that it used a combination of 50 per cent swaps and 50 per cent puts to hedge the natural gas volumes, which preserves significant upside if natural gas prices rise.

Linn plans to fund the deal through a private offering of $1.5 billion in senior unsecured notes.