British oil giant BP plc (BP, BP_UN.TO, BP.L) said Monday it has agreed to sell its interests in the Jonah and Pinedale upstream operations in Wyoming to Linn Energy, LLC (LINE) for $1.025 billion in cash. The sale is expected to be completed by July 31, 2012.
The Jonah assets are located in the Green River Basin of southwest Wyoming. It has proved reserves of about 730 billion cubic feet equivalent, of which 73 percent is natural gas and 23 percent is natural gas liquids.
Under the deal, BP will sell its operations center in Sublette County, Wyoming, and all of its working interests in about 260 operated wells with recent net natural gas production of 80 million standard cubic feet equivalent of gas a day or mmscfe/d, and non-operated wells with recent net production of 66 mmscfe/d.
Bob Dudley, BP group chief executive, said, "This sale will allow us to realise the value of the mature Jonah assets and reinvest in higher growth opportunities in BP's North America gas business and elsewhere."
However, BP said that its upstream production operations in Moxa and Wamsutter, Wyoming, are not affected by the sale. The company noted that its U.S. onshore upstream operations are an integral part of its business and it continues to look at growth opportunities over the long-term.
BP noted that its North America Gas business has a presence in seven of the leading gas basins in the U.S. Lower 48 states. In 2011, BP produced over 1,800 mmscf/d natural gas in the U.S.
According to BP, the deal to sell the Jonah assets brings the total value of divestments that it has agreed since the start of 2010 to around $24 billion. The company expects the total to increase to $38 billion by the end of 2013. BP went on an asset sale spree in the wake of Deepwater Horizon disaster in 2010.
Separately, Linn Energy said it expects to finance the transaction with proceeds from borrowings under its revolving credit facility.
Mark Ellis, Chairman, President and Chief Executive Officer of Linn Energy said, "These properties are expected to provide approximately 145 million cubic feet equivalent per day of liquids-rich natural gas production."
Ellis said that Linn Energy expect the asset to be immediately accretive to distributable cash flow per unit. He added that the company has hedged 100 percent of the expected net oil and natural gas production associated with the transaction for about six years through 2017.
Linn Energy expects the deal to bring the company estimated adjusted earnings before interest, taxes, depreciation and amortization or EBITDA of about $160 million in the first 12 months.
In late February, Linn Energy agreed to buy Hugoton Basin properties located in Kansas from BP America Production Co. for $1.2 billion.
BP is currently trading at $37.47, down $0.90 or 2.35 percent on 1.15 million shares. LINE is trading at $35.23, down $0.86 or 2.38 percent on 281,694 shares.
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