Matt Zborowski
Assistant Editor
Linn Energy Inc., Houston, and Citizen Energy II LLC, Tulsa, have each agreed to contribute 70,000 net acres in Oklahoma to form Roan Resources LLC, an equally owned company focused on the Merge-SCOOP-STACK play of the Anadarko basin.
Roan's 140,000 total net acres will be largely contiguous in Canadian, Carter, Cleveland, Garvin, Grady, Kingfisher, McClain, and Stephens counties. The acreage's estimated total resource potential is 2 billion boe, more than half of which Linn and Citizen believe can be developed from longer lateral drilling units with higher rates of return.
Combined production on the acreage averaged more than 20,000 boe/d as of May and, at current rig pace, is forecast to have an exit rate of more than 40,000 boe/d by yearend, with additional growth expected as drilling increases.
The firms are currently operating a combined 5 rigs in the Merge with plans to drill 58 gross wells in 2017. The total Roan position includes 1,500 net drilling locations identified by the firms, which see 20 years of development assuming a 6-rig program with additional upside from down spacing and other prospective benches.
The deal is expected to close by the end of the third quarter. Roan is expected to have no outstanding debt at closing and intends to establish a new revolving credit facility secured by its own assets. An initial public offering is expected in early 2018.
Roan will have independent management and a separate board, with a chief executive officer who will be jointly designated by Linn and Citizen. Roan is actively recruiting an executive management team and hopes to accelerate development over the next 18 months.
Linn will retain its majority operated position of 105,000 net acres in the Northwest STACK and its Chisholm Trail midstream business, including a 250-MMcfd capacity cryogenic plant currently under construction. The Linn-contributed acreage in the deal remains dedicated to Chisholm Trail.
Since completing its restructuring earlier this year, Linn has sharpened its focus on the Merge-SCOOP-STACK while divesting more than $1 billion in assets, including its exits from California and Salt Creek field in Wyoming as well as its sale of interests in properties in western Wyoming (OGJ, June 19, 2017, p. 22).
Citizen, formed in second-half 2014 and backed by JVL Advisors LLC and its managed funds, is focused on Midcontinent horizontal developments.
