Permian Basin Wolfcamp: $61,600/Mineral Acre -- And One Can Still Get Bakken Acreage For $6,000/Acre

Motley Fool has an interesting piece this week. The lede:

I think that LINN Energy LLC  and, by association, LinnCo LLC are hiding something big. And that's a good thing. Because that means investors still have a chance to invest in either company before the big reveal. 

So, what is LINN Energy hiding? The remarkable untapped value of its horizontal acreage in Texas' Permian Basin. The company believes that it holds about 60,000 net acres that have horizontal potential for the Wolfcamp formation.

Later, in the article, a bit of asset juggling:

The reasons this is still a big secret is because the drilling shift from vertical to horizontal in these areas of the Permian Basin is still in its infancy. That's actually creating some crazy shifts in reporting as one of LINN Energy's peers, for example, was forced to erase 185 million barrels of oil from its books as it can't yet book the horizontal inventory because there isn't enough data. That said, early data is so compelling that the company believes that it will likely add back nearly 600 million barrels of oil equivalent over the next few years as it drills more horizontal wells. Similar horizontal potential exists at LINN Energy and by association is available to LinnCo investors as well.

But this is pretty easy to understand:

Just today LINN Energy's partner on its first horizontal well, Diamondback Energy, announced that it was adding to its acreage position in the play. The company is picking up 2,825 net acres in the play, and it's paying $174 million for those acres. The company hopes to eventually buy out its partners on the 6,450 gross acres that are associated with this asset package, and it's willing to fork over a total of $397 million to buy out those partners. To put those numbers into perspective that's more than $61,500 per acre.

Actually, I did the math. The Motley Fool numbers are slightly off: $174,000,000 / 2,825 acres works out to $61,592.92 which is closer to $61,600 than $61,500. And it's that kind of math that gets analysts in trouble. LOL. 

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or anything you think you may have read here. Regardless of what Linn is or is not doing, and regardless of what Motley Fool says about it, I was more interested to see how much folks are willing to pay for a mineral acre in a field that is 50 years old and, up until a year ago, considered to be dead or dying. I don't invest in LINN Energy, never have, and probably never will.