President And CEO Of LINN Energy, LLC (LINE) Reflects On Significant Acquisition Of Plains Interest In The Granite Walsh Area; 40% Top-line Growth Achieved For Firm In 2011
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Mark E. Ellis is the Chairman, President and Chief Executive Officer of LINN Energy, LLC. Mr. Ellis has more than 30 years of experience in the oil and natural gas industry. He joined LINN Energy in December 2006 as Executive Vice President and Chief Operating Officer, was promoted to President and COO in December 2007, President and CEO in January 2010 and his current role in December 2011. Before joining LINN, he served as President of the Lower 48 for ConocoPhillips. Before joining ConocoPhillips, Mr. Ellis served as Senior Vice President of North American Production for Burlington Resources. He first joined Burlington in 1985 and served in roles of increasing responsibility, including President of Burlington Resources Canada Ltd. in Calgary, Vice President and Chief Engineer, Vice President of the San Juan Division and Manager of Acquisitions.
TWST: Please start with a brief company history and an overview of business operations and strategy today, to give readers an introduction to LINN Energy.
Mr. Ellis: The company was founded by a gentleman by the name of Mike Linn, and it wears his name. Mike founded the company in 2003 with some private equity money behind him as an Appalachian-based company focused on Appalachian assets. About January 2006, it was still a very small company, but we went public as the first publicly traded LLC with the understanding that we would grow west of Appalachia at that point in time. When we went public, I would say we were probably about a $500 million to $700 million company.
Then, we rapidly grew west of Appalachia, penetrating into the Mid-Continent area of the U.S. and reaching out all the way to California. Since that time, we've added a number of various transactions to grow the company.As a publicly traded LLC, the base strategy was to accumulate and acquire mature assets, optimize the cash flow from those assets, and return a substantial portion of that cash flow to our unitholders in the form of quarterly distributions. LINN has sound operating capabilities and utilizes the financial markets, such as hedging our oil and natural gas production, to take away a lot of price volatility. This helps provide a stable cash flow stream and distribution. It also helps position the company to grow our distribution.
TWST: The company has been growing significantly. What did you achieve during 2011 and how did you do that?
Mr. Ellis: In 2011, we achieved top-line growth of around 40%. In terms of that total production growth, a significant portion came from our organic development activity in the Permian Basin and Granite Wash play of the Texas Panhandle. We initiated development of these two plays in 2010. So in 2011, you saw a full-year impact associated with that activity. And they still speak for the majority of our capital investment going forward.Our overall growth last year can also be attributed to acquisition activity. We spent about $1.5 billion acquiring assets that complemented our already existing asset positions.
We also entered the Williston Basin early in the year, and we closed the year out with a very significant acquisition of Plains' interest in the Granite Wash area. That was probably the single-largest transaction we did over the course of the year. In 2011, we grew at a rate of 39% - I think probably 20%-plus of that was organic and the other portion was acquisition activity through the year. As you page forward into 2012, our initial guidance was 40% growth year over year, about 20% organic, 20% through the acquisition impact. This reflects the full impact of developing the 2011 acquisitions for the full year in 2012. With the announced transactions we've already made in the early part of this year, I expect to see us increase guidance.
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