m&a: linn energy buying older oil fields

Transaction highlights related to MAD:
- focused on liquids (75%)
- lots of smaller wells
- enterprise value $4.3 bn for 275m barrels = $15/barrel (MAD $2/barrel)
But lower risk in BRY as more mature with higher production.

Significant upside to current MAD share price (>7x) once production better aligns with reserves.

Building a business with significant infrastructure takes time. Management should only have drilled a couple of holes targeting the Het formation and then moved on. But otherwise have full confidence in the approach. Posts on this forum sometimes lack an understanding for what it takes to build an operational business. Have a background in investment banking (M&A advisory) hence my interest in this transaction. But currently building an operational business and feeling the patience this requires!

BLOOMBERG:
Linn Energy LLC (LINE), which buys older oil and natural gas fields, agreed to purchase Berry Petroleum Co. (BRY) for $2.42 billion in stock to increase its proved reserves by 34 percent.
Berry shareholders will get 1.25 shares of publicly traded LinnCo LLC (LNCO), a corporation whose only assets are units of Linn Energy, according to a joint statement released today. That values Berry at $46.24 a share, a 20 percent premium to yesterday’s closing price. LinnCo will sell the Berry assets to Linn Energy in exchange for additional partnership units.
Berry’s reserves are 75 percent oil, which increases Linn’s exposure to liquids, which are more profitable than natural gas. The deal is the biggest oil and gas purchase announced this year and the largest ever for Linn, according to data compiled by Bloomberg. Last year, the company announced four deals, valued at a total of $2.6 billion.
The “deal makes sense given Berry’s portfolio,” Tudor Pickering Holt & Co. analysts wrote today in a note to clients. The acquisition adds long-lived assets with slow decline rates, including fields in California, to Linn’s holdings, the note said. Tudor Pickering rates Berry shares at a hold.