Linn Energy, LLC has agreed to sell all of its interests in oil and gas properties in the Appalachian Basin, including its Marcellus Shale acreage, to XTO Energy Inc. for cash consideration of $600 million, subject to closing adjustments. The Company will use proceeds to reduce indebtedness under its credit facility and anticipates closing on July 1, 2008. The properties include proved reserves, as estimated by a third-party engineering firm at December 31, 2007, of approximately 197 billion cubic feet of natural gas equivalent (99% natural gas) and currently produce 25 million cubic feet of natural gas equivalent per day.
"Linn Energy's core strategy is to focus on low risk development opportunities, and recent enthusiasm regarding the prospective Marcellus Shale play provided the incentive for us to evaluate our holdings in Appalachia and determine their fit within our strategy and MLP structure," said Michael C. Linn, Chairman and Chief Executive Officer of Linn Energy. "A delineation of opportunities in the Marcellus will take time and successful exploration and development will require significant capital investment. We believe that monetizing our Appalachian assets has created significant value for our unitholders and that the sale represents full value for our Marcellus acreage and Appalachian proved reserves."
Pro forma for the sale, Linn Energy will have a strong financial profile with availability under its credit facility of approximately $700 million. The Company plans to issue revised guidance with its first quarter earnings release. However, the Company does not expect the sale to materially alter its previously issued guidance for distributable cash flow or distribution coverage and believes the sale will not impact its ability to earn and pay its distribution at the current annualized rate of $2.52 per unit. Closing is subject to customary closing conditions and the expiration of the waiting period under Hart-Scott-Rodino Antitrust Improvement Act of 1976.
Lehman Brothers Inc. acted as financial advisor to Linn Energy and conducted a multi-party auction process for this transaction.