Houston-based Linn Energy has teamed up with private equity firm Quantum Energy for a $1 billion asset purchase plan.
Quantum has agreed to initially commit up to $1 billion of equity capital to fund acquisitions and development of oil and natural gas assets, Linn said Tuesday.
Linn will be able to participate in all acquisition opportunities with a direct working interest ranging from 15 percent to 50 percent.
The partnership will be focused on conventional and unconventional resource development opportunities across the United States.
The acquired assets will be managed by Linn in exchange for a reimbursement of general and administrative expenses.
Linn will also be able to earn a promoted interest in the assets after certain investor return hurdles are met.
The partnership could yield more than $2.5 billion of acquisition and development funding when the $1 billion equity commitment is combined with the ability to leverage the jointly acquired assets and Linn’s acquisition of a direct working interest.
The agreement also provides for potential future commitments of equity capital from Houston-based Quantum that would increase the total size of the joint acquisitions.
“As the founding investor in Linn and a leading private capital provider to the energy sector that also participated in the formation of two other upstream MLPs, Quantum is uniquely qualified for this new acquisition alliance,” Linn chairman, president and CEO Mark E. Eliis said.
Linn said the deal will create multiple strategic advantages including creating a “drop-down” entity to purchase and harvest on an ongoing basis and enhancing the company’s ability to “capture acquisition opportunities during distressed market conditions.”
The partnership will have five directors on its board with Quantum and its representatives holing three seats and Linn holding two seats.