After the close of trading on March 22, Linn Energy (NSDQ: LINE) announced its intention to acquire natural gas producing properties in the Antrim Shale region of Michigan for $330 million. The deal is projected to close before the end of next month and represents the largest such deal by Linn Energy since a $550 million acquisition announced in late 2007.

To fund the deal, Linn Energy has amended its credit facility, extending the maturity date until 2015. The partnership will also offer $500 million worth of bonds via a private offering and sell 12 million units as part of a secondary offering. The secondary offering includes an over-allotment of an additional 1.8 million units.

Linn Energy’s management also noted a big pick-up in the level of acquisition activity going on in the oil and gas market. The company believes the money it’s raising via the debt and equity markets puts the firm in a good position to participate in upcoming deals.

Over the past nine months, master limited partnerships (MLP) and publicly traded partnerships have completed dozens of debt and equity offerings. As long-time readers are aware, it’s not unusual for stocks to trade lower immediately after announcing new equity offerings; investors’ knee-jerk reaction is to sell, as the new units represent a dilution of existing holders’ stake in the firm. In this case, Linn Energy has a total float of 125 million units; its secondary offering will increase that count by roughly 10 percent.

However, these deals are historically not dilutive for MLPs and limited liability companies (LLC) like Linn; most MLPs use the proceeds of these offerings to make acquisitions that are accretive to distributable cash flows

Share prices have recovered quickly each time one of our recommended MLPs has offered additional units. Any dip following such a transaction represents an outstanding opportunity to buy.

In this case, Linn Energy’s management has noted for months that it would make accretive acquisitions. That the partnership was able to fund this deal with a combination of debt and equity demonstrates the health of the stock and credit markets for high-quality firms.

Linn Energy’s modus operandi is to buy properties and immediately hedge production for years into the future to lock in their cash flows. The weak natural gas prices that prevail these days would have no meaningful impact on the economics of the deal or subsequent cash flows

Rising cash flows from this and other recent acquisitions should enable the partnership to increase in its distribution over the next few quarters. Linn remains a Buy under 28; investors should use any dip following this announcement to buy the units at an attractive price.