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LINN to divest Wyo. acreage for $71.5M, stands to eliminate all debt

LINN Energy Inc. agreed to divest certain acreage in the Salt Creek Field in Wyoming to Denbury Resources Inc. for $71.5 million, earning enough proceeds to clear all remaining debt.

The deal is LINN's second in its noncore divestiture program, launched to reduce borrowings under its revolving credit facility and term loan. The company has signed sale agreements totaling $916 million to date, according to a May 30 news release.

The properties are composed of 23% non-operated working interest in about 5,000 net acres in the Salt Creek Field, which yielded about 2,000 barrels of oil equivalent per day of net production in the first quarter of 2017. It also has about 9 MMBoe of proved developed reserves and $54 million of proved developed PV-10, or present value discounted at 10% per year of estimated future net cash flows.

Denbury estimates capital cost for the properties to be about $5 million in 2017. Based on development plans, the company may recognize an additional 9 million barrels of proved undeveloped reserves, resulting in finding and development costs of less than $7 per bbl.

The $4 million of capital LINN previously allotted for the development of these properties would instead be used to develop growth projects or shore up the balance sheet.

"Pro-forma following the closing of the Jonah, South Belridge and Salt Creek asset sales, the company will have extinguished all remaining outstanding debt. This is a significant achievement for the company considering it had approximately $8.4 billion in debt outstanding at the end of 2015," said Mark Ellis, CEO of LINN, in the release.

The deal is scheduled to close in the second quarter of 2017 with an effective date of March 1. LINN said that CIBC Griffis & Small and Jefferies LLC acted as co-financial advisers and Kirkland & Ellis LLP served as legal counsel.