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Linn Energy plans to separate into 3 businesses by mid-2018

Linn Energy Inc. plans to separate into three standalone companies by mid-2018 in an effort to unlock what its CEO sees as a significant the sum-of-the-parts discount.

Under the separation plan outlined Dec. 14, Linn Energy would form one company out of its upstream assets in the Mid-Continent, one company that holds midstream assets in the same region, and then a third company that would have the rest of Linn's assets.

Linn Energy would become the holding company for its 50% equity stake in Roan Resources LLC, an exploration and production company it recently formed with the privately owned Anadarko Basin producer Citizen Energy II LLC. Linn Energy is in discussions with Citizen Energy II for a possible consolidation of 100% of equity in Roan into Linn. The result would be a pure play company focused on development in the Merge/SCOOP/STACK plays in Oklahoma, according to a Dec. 14 news release.

Linn is also examining strategic alternatives for its midstream subsidiary, Blue Mountain Midstream LLC, that would involve the company having its own management team, capital structure, third-party acreage dedications and strategic investments. Blue Mountain Midstream, which would also be focused in the Mid-Continent, could also have a separate public listing.

Linn Energy would divest assets outside the SCOOP/STACK into a new public company, though it has not defined a strategy for that entity.

Separately, Linn proposed to launch a tender offer to buy back at least $250 million of its common shares at a premium before the end of 2017. To fund the tender offer, Linn would use proceeds from its divestitures of assets in the Williston Basin and Wyoming's Washakie Field, which yielded a combined price of $485 million.

The tender offer would augment the company's ongoing $400 million share repurchase program, under which Linn has so far repurchased about 5.6 million shares, or 6% of outstanding shares, for approximately $194 million. The program would continue after the planned tender offer closes.

Roan Resources also named Joel Pettit as its executive vice president in charge of operations and marketing. Pettit previously served as the operations manager for the Midland and Oklahoma City divisions at EOG Resources Inc.

Greg Condray was appointed as the executive vice president for geoscience and business development. Condray formerly worked at Chesapeake Energy Corp., where he focused on exploration and development at the company's Eagle Ford Shale, Haynesville and Powder River Basin positions, and at EOG Resources, where he helped assemble its position in the Merge area of Oklahoma.

Roan Resources is focused on the development of over 150,000 net acres in the Merge/SCOOP/STACK play of Oklahoma, mostly in the Woodford and Mississippian formations.