LINN Energy has reached a deal with BP America Production Co. to acquire 600,000 acres in the Hugoton Basin for $1.2 billion, according to the Houston-based oil and natural gas development company.
The deal, funded by borrowing under LINN’s revolving credit facility, is expected to close by March 30, subject to closing conditions, the company announced Monday.
The southwest Kansas property has about 2,400 operated wells and is expected to produce 110 million cubic feet of natural gas equivalent, said LINN Energy CEO Mark E. Ellis, in a written statement. The company estimated that 63 percent of the hydrocarbons produced will be dry natural gas and 37 percent will be natural gas liquids.
The acreage “is expected to provide a very steady stream of cash flow with little requirement for capital investment,” Ellis said.
In the deal, LINN also takes control of the Jayhawk natural gas processing plant in Ulysses, Kan., which can process up to 450 million cubic feet per day.
Currently, LINN’s largest current holdings are in the Permian Basin, California, Michigan and the Mid-Continent area.
The Hugoton acquisition adds 730 billion cubic feet equivalent of proved reserves to LINN’s existing 4.1 trill cubic feet of proved reserves.