It's a Linn-Linn situation. Founder and chairman Michael Linn's namesake company Linn Energy has successfully drilled for oil and natural gas across the US, although in recent years the company has narrowed its focus to exploiting assets in the Mid-Continent, California, and the Permian Basin. In 2011 the company reported proved reserves of 4.1 trillion cu. ft. of natural gas equivalent. The company operates about 70% of its more than 10,380 gross productive wells. In addition to its core oil and gas activities, Linn Energy pursues an aggressive hedging strategy to reduce the effects of oil price volatility on its annual income.
The company's oil and gas properties are located primarily in the Mid-Continent, the Permian Basin, Michigan, California, and the Williston Basin.
Linn Energy's revenues increased by 68% in 2011 primarily due to higher commodity prices and higher production volumes. In addition, the company held commodity derivative contracts for approximately 101% of its natural gas production and 101% of its oil production, which resulted in realized gains of approximately $257 million.
Net income increased by 484% in 2011 due to higher revenues offset by an increase in depreciation, depletion, and amortization expenses resulting from costs associated with higher production volumes. Other expenses increased due to higher outstanding debt during the period and higher amortization of financing fees.
Revenue growth from 2009 through 2011 is largely due to the success of capital drilling programs in the Deep Granite Wash formation, as well as the impact of the acquisition in the Cleveland Play in June 2011.
Looking for a new way to raise additional equity capital, in 2012 the company formed Linn Co. LLC and launched an initial public offering seeking up to $1 billion. Linn Co. LLC was formed to buy shares in Linn Energy and expand its investor base. Linn Co. LLC will use its IPO proceeds to help fund Linn Energy's acquisition strategy.
Linn Energy has pursued a strategy of buying mature properties and extending the life of these natural gas fields by workovers and improved field operations, including the use of additional production equipment and drilling activities. To pay for its focus on the Permian basin and Mid-Continent, the company has sold its assets in the Appalachian Basin and Mid-Atlantic regions.
Growing its asset base, in 2012 Linn Energy acquired BP's Hugoton properties in Kansas for $1.2 billion and properties in East Texas from a separate company for $175 million. Later that year it agreed to another purchase from BP, this time 12,500 acres in Wyoming's Jonah Field. Linn will pay more than $1 billion for the property, which includes 750 producing wells and more than 730 billion cu. ft. of natural gas equivalent.
Also in 2012 the company teamed up with an Anadarko Petroleum affiliate, forming a $400 million joint venture to develop a carbon dioxide enhanced oil recovery project in the Salt Creek field in the Powder River Basin.
In 2010 the company bought three more oil and natural gas properties in the Wolfberry trend of the Permian Basin for about $378 million. Further boosting its oil and natural gas liquids assets, in 2011 it bought three additional assets in the Bakken shale and the Permian Basin (including the Cleveland play) for $434 million. – less