LINN Energy (LINE) Issues Update on Granite Wash; Guides FY12 Ops, CapEx
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LINN Energy, LLC (Nasdaq: LINE) announced today a 2012 oil and natural gas capital program of $880 million. The capital program will be focused primarily on low-risk, high-rate-of-return, liquids drilling.
The company expects to drill or participate in approximately 340 wells in 2012. Approximately 53 percent of its capital program will be allocated to the Granite Wash to drill or participate in 75 horizontal wells, 23 percent to the Permian Basin to drill or participate in almost 100 wells, 6 percent to the Bakken and 6 percent to the Cleveland play. The balance of the capital program will primarily focus on workover, recompletion, optimization and facilities projects.
Granite Wash Inventory Update
LINN closed its recently announced Granite Wash acquisition for approximately $530 million, subject to post-closing adjustments. To date, LINN has drilled 36 operated horizontal wells in the play. Going into 2011, the company had identified 200 horizontal drilling locations in the Granite Wash. The knowledge gained through its horizontal drilling program enabled the company to add 200 additional horizontal drilling locations to its inventory in 2011, and the recent acquisition added another 200 locations.
LINN will begin its 2012 horizontal drilling program with a total of 600 drilling locations that should provide a 10-year drilling inventory in the Texas portion of the play alone. The company plans to drill 59 operated horizontal wells and anticipates the program will generate rates of return in excess of 50 percent. The company also plans to participate in 16 non-operated horizontal wells in 2012.
Commodity Hedge Update
The company strengthened its commodity hedge positions and fully hedged production volumes associated with its Granite Wash acquisition. Based on current production estimates, expected natural gas production is 100 percent hedged at prices above $5.45 per Mcf through 2015. Expected oil production is 100 percent hedged at prices above $97 per Bbl through 2013 and approximately 80 percent at prices above $95 per Bbl in 2014 and 2015.
The table below sets forth estimated financial and operational guidance for 2012.
The company expects to drill or participate in approximately 340 wells in 2012. Approximately 53 percent of its capital program will be allocated to the Granite Wash to drill or participate in 75 horizontal wells, 23 percent to the Permian Basin to drill or participate in almost 100 wells, 6 percent to the Bakken and 6 percent to the Cleveland play. The balance of the capital program will primarily focus on workover, recompletion, optimization and facilities projects.
Granite Wash Inventory Update
LINN closed its recently announced Granite Wash acquisition for approximately $530 million, subject to post-closing adjustments. To date, LINN has drilled 36 operated horizontal wells in the play. Going into 2011, the company had identified 200 horizontal drilling locations in the Granite Wash. The knowledge gained through its horizontal drilling program enabled the company to add 200 additional horizontal drilling locations to its inventory in 2011, and the recent acquisition added another 200 locations.
LINN will begin its 2012 horizontal drilling program with a total of 600 drilling locations that should provide a 10-year drilling inventory in the Texas portion of the play alone. The company plans to drill 59 operated horizontal wells and anticipates the program will generate rates of return in excess of 50 percent. The company also plans to participate in 16 non-operated horizontal wells in 2012.
Commodity Hedge Update
The company strengthened its commodity hedge positions and fully hedged production volumes associated with its Granite Wash acquisition. Based on current production estimates, expected natural gas production is 100 percent hedged at prices above $5.45 per Mcf through 2015. Expected oil production is 100 percent hedged at prices above $97 per Bbl through 2013 and approximately 80 percent at prices above $95 per Bbl in 2014 and 2015.
The table below sets forth estimated financial and operational guidance for 2012.
- Net production (MMcfe/d) - 520
- Adjusted EBITDA (millions) - $1,175
- Distributable cash flow per unit - $3.30
- Distribution coverage ratio - 1.20x
- Distribution per unit - $2.76
- Growth capital (millions) - $580
- Maintenance capital (millions) - $300
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