LINN ENERGY, INC. (OTCMKTS:LINEQ) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.
| Entry into a Material Definitive Agreement. |
Purchase and Sale Agreement
On May25, 2017, Linn Energy Holdings, LLC (LEH) and Linn
Operating, LLC (LOL and together with LEH, the Seller), each of
which is a wholly owned subsidiary of Linn Energy, Inc. (the
Company), entered into a purchase and sale agreement (the PSA)
with Denbury Onshore, LLC (the Buyer). to the terms of the PSA,
the Seller agrees to sell approximately 5,000 total net acres
located in the Salt Creek Field, Wyoming to the Buyer for
$71.5million in cash, subject to purchase price adjustments (the
Denbury Assets Sale). Proceeds from the Denbury Assets Sale are
expected to be used to reduce outstanding borrowings under the
Companys revolving credit facility. The Denbury Assets Sale is
expected to close in the second quarter of 2017, with an
effective date of March1, 2017.
The PSA contains various representations, warranties, covenants
and indemnification obligations of the Seller and the Buyer that
are customary in transactions of this type. The closing is
subject to satisfaction or waiver of specified conditions,
including the material accuracy of the representations and
warranties of the Seller and the Buyer. There can be no assurance
that these closing conditions will be satisfied.
The PSA may be terminated, subject to certain exceptions, (i)by
mutual written consent of the Seller and the Buyer, (ii)resulting
from certain material breaches of the PSA that remain uncured and
cause the failure of certain closing conditions, (iii)if the
closing has not occurred on or before August1, 2017, (iv) in the
event the conditions related to the Title Defect Values (as
defined in the PSA) and the Aggregate Environmental Defect Values
(as defined in the PSA) are not satisfied and (v)upon the
occurrence of certain other events specified in the PSA.
On May26, 2017, the Buyer placed into escrow approximately
$7.15million (the Deposit Amount). If the PSA is terminated under
certain circumstances resulting from a breach of the PSA by the
Buyer, the Seller will be entitled to receive the Deposit Amount
as liquidated damages. Alternatively, if the PSA is terminated
under certain circumstances resulting from a breach of the PSA by
the Seller, the Buyer will be entitled, in addition to seeking
damages for breach of the PSA, to receive the Deposit Amount.
The foregoing description of the PSA and the transactions
contemplated thereby does not purport to be complete and is
qualified in its entirety by reference to the PSA, which will be
filed with the Companys Form 10-Q for the quarter ending June 30,
2017. The PSA is filed herewith to provide investors with
information regarding its terms. It is not intended to provide
any other factual information about the Company, the Seller or
the Buyer as of the specific dates therein, is solely for the
benefit of the parties to the PSA, may be subject to limitations
agreed upon by the contracting parties, including being qualified
by disclosures made for the purposes of allocating contractual
risk between the contracting parties that differ from those
applicable to investors. Investors are not third-party
beneficiaries under the PSA and should not rely on the
representations, warranties and covenants or any descriptions
thereof as characterizations of the actual state of facts or
condition of the parties thereto or any of their respective
subsidiaries or affiliates. Moreover, information concerning the
subject matter of representations and warranties may change after
the date of the PSA and this subsequent information may or may
not be fully reflected in the Companys public disclosures.
First Amendment to Credit Agreement
On May31, 2017, the Company entered into the First Amendment and
Consent to Credit Agreement (the First Amendment), by and among
Linn Energy Holdco II LLC, as borrower (the Borrower), Linn
Energy Holdco LLC, the Company, the subsidiary guarantors named
therein, Wells Fargo Bank, National Association, as
administrative agent (the Administrative Agent), and each of the
lenders party thereto (the Lenders). The First Amendment amends
the parties existing Credit Agreement, dated as of February28,
2017 (the Credit Agreement) to provide for, among other things:
(i) the payment in full of the outstanding principal and interest
due on account of the term loan under the Credit Agreement and
the payment of a portion of the outstanding principal and
interest due on account of the reserve-based revolving loan under
the Credit Agreement, as funded by no less than $500million in
minimum net cash proceeds from the Jonah Assets Sale (as defined
in Item 2.01 below);
(ii)the elimination of the non-conforming borrowing base in
respect of the revolving loan facility;
(iii) a decrease in the Borrowers permitted maximum total net
debt to EBITDA maintenance covenant ratio to no more than 4.00 to
1.00, as measured as of the last date of each fiscal quarter,
with the first measurement date to be reset to September30, 2017;
(iv) an additional requirement that the Borrower maintain a
minimum maintenance covenant ratio of current assets (including
undrawn capacity under the revolving credit agreement) to current
liabilities of no less than 1.00 to 1.00, measured as of the last
date of any fiscal quarter for the trailing twelve month period
then ended, beginning with the fiscal quarter ending September30,
2017;
(v) the addition of certain permitted investments and restricted
payment baskets, including share repurchases up to $75 million,
each subject to certain specified terms, conditions, and
thresholds;
(vi) the addition of flexibility to contribute specified assets
to unrestricted subsidiaries and permitted joint ventures, each
subject to certain terms and conditions, including certain
separateness covenants;
(vii) the parties consent to certain borrowing base adjustments
in connection with the sale of certain oil and gas properties,
including the Denbury Assets Sale and the Jonah Assets Sale;
(viii) the parties consent to a $1billion borrowing base,
applicable to the period beginning on May31, 2017, with the next
scheduled borrowing base redetermination to occur on October1,
2017; and
(ix) an extension of the deadline for entry into natural gas swap
agreements for calendar year 2019 to October1, 2017.
The First Amendment also contains customary representations,
warranties and agreements of the Borrower, the Company, and its
subsidiary guarantors.
All other material terms and conditions of the parties existing
Credit Agreement were unchanged.
The foregoing description of the First Amendment does not purport
to be complete and is qualified in its entirety by reference to
the First Amendment, which will be filed with the Companys Form
10-Q for the quarter ending June 30, 2017.
Cautionary Note Regarding Forward-Looking
Statements
Certain statements in this Current Report on Form 8-K are
forward-looking and are based upon the Companys current belief as
to the outcome and timing of future events. All statements, other
than statements of historical facts, that address activities that
the Company plans, expects, believes, projects, estimates or
anticipates will, should or may occur in the future are
forward-looking statements. Important factors that could cause
actual results to differ materially from those in the
forward-looking statements herein include, but are not limited
to, the ability to consummate the Denbury Assets Sale as
contemplated by the PSA, the use of the proceeds from the Denbury
Assets Sale to reduce outstanding borrowings under the Companys
debt instruments and the risk factors and known trends and
uncertainties as described in the Companys Annual Report on Form
10-K as filed with the Securities and Exchange Commission. These
and other important factors could cause actual results to differ
materially from those anticipated or implied in the
forward-looking statements. Please read Risk Factors in the
Companys Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and other public filings. The Company undertakes no
obligation to publicly update any forward-looking statements,
whether as a result of new information, future events or
otherwise.
| Item2.01 |
Completion of Acquisition or Disposition of Assets. |
On May31, 2017, LEH and LOL completed the previously announced
sale to Jonah Energy LLC of producing wells and developed and
undeveloped acreage covering approximately 27,500 total net acres
located in western Wyoming (the Jonah Assets Sale). The Company
used the net cash proceeds received of approximately $561million
to repay in full its approximate $294million term loan and to
repay a portion of the borrowings outstanding under its revolving
loan.
The foregoing description of the Jonah Assets Sale does not
purport to be complete and is qualified in its entirety by
reference to the Purchase and Sale Agreement, dated April30,
2017, by and between LEH, LOL and Jonah Energy LLC, which was
filed with the Companys Current Report on Form 8-K on May4, 2017
and is incorporated by reference herein.
| Item2.03 |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement. |
The description of the First Amendment included under Item 1.01
of this Current Report on Form 8-K is incorporated by reference
herein.
| Item9.01. | Financial Statements and Exhibits. |
(b) Pro Forma Financial Information.
The unaudited pro forma condensed consolidated balance sheet of
the Company as of March31, 2017, which gives effect to the Jonah
Assets Sale, and the unaudited pro forma condensed consolidated
statements of operations of the Company for the three months
ended March31, 2017, and the year ended December31, 2016, which
give effect to the Jonah Assets Sale as well as the Companys plan
of reorganization and fresh start accounting, are furnished as
Exhibit 99.1 to this Current Report on Form 8-K and incorporated
by reference herein.
(d) Exhibits.
|
Exhibit Number |
Description |
|
| 99.1 |
The unaudited pro forma condensed consolidated balance sheet of the Company as of March31,2017, which gives effect to the Jonah Assets Sale, and the unaudited pro forma condensed consolidated statements of operations of the Company for the three months ended March31, 2017, and the year ended December31, 2016, which give effect to the Jonah Assets Sale as well as the Companys plan of reorganization and fresh start accounting. |