This Area Could be What LINN Energy Trades Next

Photo credit: Apache

LINN Energy recently announced its first asset trade in the Permian Basin.

With nearly 30,000 acres left to trade the company likely will make another deal in the future for at least some of this acreage.

One of the reasons LINN Energy is trading these assets is because it wants to lower its production decline rate.

Horizontal oil and gas wells like those drilled in the Permian Basin are very high decline wells.

That doesn’t help the decline rate, which is why the company is looking to trade these assets for lower decline properties.

However, the Permian Basin isn’t the only area where the company has prospective horizontal acreage that can be traded away.

LINN Energy also has a very large acreage position in the Mid-Continent.

It’s a region that like the Permian Basin is stacked with oil and gas plays.

Source: LINN Energy Investor Presentation

The problem with these assets is that the its one of LINN’s highest decline areas.

It’s one reasons why the company reduced its capital spending in the area this year.

However, while LINN Energy doesn’t like the decline rate, industry peers like Chesapeake Energy, Apache and others don’t mind.

The problem with these assets is that it’s one of LINN’s highest decline areas.

This is one reason why the company reduced its capital spending in the area this year.

However, while LINN Energy doesn’t like the decline rate, industry peers like Chesapeake Energy, Apache and others don’t mind.

LINN Energy would like to be able to take advantage of this to potentially monetize some of its acreage positions in the Mid-Continent in trades for more mature, long-lived assets that help it reduce its overall decline rate.

The company is currently cataloging its opportunities.

LINN currently holds 95,000 net acres in the Granite Wash.

In addition to that the company holds more than 450,000 net acres in the Anadarko Basin.

Source: LINN Energy website

The Granite Wash is an area that both Apache and Chesapeake Energy really like.

Chesapeake Energy has 91,000 net acres in the core area of the Granite Wash and is running about five rigs in 2014.

Apache has 435,000 net acres and plans to drill 62 wells this year.

Both see the potential to increase activity in the future.

Chesapeake Energy’s Granite Wash position:

Apache’s Granite Wash position:

In addition to the Granite Wash, drillers are looking at other areas within the Mid-Continent that one day might benefit LINN Energy’s position in the region.

Continental Resources, Devon Energy and others are focusing in on the SCOOP, STACK and Cana plays.

Meanwhile, SandRidge Energy and Chesapeake Energy are drilling in the Mississippian Lime.

Continental Resources SCOOP Position:

Devon Energy Anadarko Basin Growth:

SandRidge Energy’s core Mississippian position:

Add it all up and LINN Energy’s Mid-Continent position is starting to become even more valuable to the company.

This is opening up endless opportunities for asset swaps as these companies look to consolidate positions and add more drilling inventory.

Further, a deal with LINN would give a quick boost to a new entrant to these stacked plays.

LINN Energy appears to have substantial potential for asset trades in the Mid-Continent.

Like the recent Permian Basin trade these trades can lower the company’s decline rate, add to distributable cash flow and create operational synergies.

Needless to say, LINN Energy has a number of ways to improve as it still has a lot of options at its disposal.

Investor takeaway

Do you know this energy take “loophole”?