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LINN Energy Plant Closure Sought

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LINN Energy filed with the U.S. Bankruptcy Court a motion for entry of an order (A) authorizing (i) the suspension of processing operations at the gas processing plant Satanta (located at Ulysses, KS); (ii) the transfer of gas processing capabilities and equipment from Satanta to the Debtors’ gas processing plant Jayhawk (also located at Ulysses, KS)’ (iii) transfer of certain plant equipment and assets and (iv) termination of gas processing agreement between Linn Energy Holdings and Anadarko Energy Services Company (AESC) and (B) approving the purchase and sale agreement between LINN Energy and Satanta, a settlement between Satanta and LINN Energy and payment of severance obligations.

According to documents filed with the Court, “The Debtors’ decision to suspend Satanta’s operations and transfer its gas processing capabilities to Jayhawk is supported by sound business justifications and should be approved by the Court….Indeed, based on the Debtors’ projections, the transfer of processing capabilities from Satanta to Jayhawk will result in an estimated $3 to $5 million in increased annual cash flow and approximately $31.3 million in total savings over the next ten years on a present value basis. Additional value may also be realized from repurposing or liquidating the Satanta Equipment through third-party sales. The anticipated Severance Obligations resulting from the suspension of operations at Satanta likely will not exceed approximately $617,000. Moreover, none of the 20 employees that may be terminated by the Debtors are ‘insiders.'”

The motion continues, “Both the Debtors and Satanta recognize that Satanta is or will become uneconomic in the near term….The Debtors anticipate that the estimated savings from suspending Satanta’s operations will greatly outweigh the Purchase Price as well as the Assumed Obligations and indemnification obligations created by the PSA. Terminating the Processing Agreement, in turn, will result in no liabilities for the Debtors.” The Court scheduled a December 8, 2016 hearing on the motion.

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