Oil and gas partnership Linn Energy says it will spend a further $525million on Permian Basin assets to increase production in the field.
The deal, with an unidentifed company, will add production equivalent to 4,800 barrels of oil a day in the first year.
Linn will pay for the purchase with debt, with the move coming in the wake of the Houston firm’s controversial $2.42billion deal to buy Berry Petroleum.
The Permian Basin stretches across western Texas and southeastern New Mexico.
Linn operates in both states, according to its website. Shares in the company jumped 13 percent after providing an update on the Berry deal which is currently being probed by the US Securities and Exchange Commission.
Linn agreed to buy Berry in February to raise reserves and increase cash flow to pay unitholders.
“They can’t sit on their hands and wait for this Berry deal to close,” John Ragozzino, an analyst at RBC Capital Markets LLC, said today in a phone interview from Austin, Texas. “They need to grow.”
Linn has been criticized for its use of options to guarantee a price for its gas output. Hedgeye Risk Management LLC, an independent research company, said in a June 18 presentation that Linn isn’t accounting for the full cost of put options and capital expenses such as drilling.