LINN Energy (NASDAQ:LINE) and LinnCo (NASDAQ:LNCO) have officially closed the acquisition of Berry Petroleum. The deal took nearly a year to complete and $600 million more than originally planned, but it appears that it will be well worth both the wait and the price. Let's take a closer look at three things investors need to know about the new LINN Energy.

Turning off the gas
The most important aspect of the Berry deal for LINN Energy and LinnCo investors is the oily nature of Berry's assets. The deal moves LINN Energy's production mix from 47% liquids to 54% liquids. This means LINN Energy investors will see the company change how it refers to its production and reserves going forward. The company will no longer describe those reserves in natural gas equivalent terms but in oil equivalent terms.

For example, LINN Energy investors will see pro forma proved reserves totaling 1,107 million barrels of oil equivalent, or MMBOE, instead of proved reserves of 6.6 trillion cubic feet equivalent. The company will also use barrel of oil equivalent, or BOE, instead of cubic feet equivalent, or CFE, when discussing its production. The point of the move is to better reflect the fact that LINN Energy now produces more oil and natural gas liquids than natural gas.

Getting bigger in important basins
LINN Energy is now the fifth-largest oil and gas producer in the state of California. That puts it up there with top oil companies like Occidental Petroleum (NYSE:OXY), which is the state's largest natural gas producer and one of its top oil producers. LINN investors will hear a lot more about California in the coming years as it goes from just 4% of reserves to 14%. Furthermore, some of Berry's best oil growth assets are in the Golden State.

LINN Energy is also getting a lot bigger in the Permian Basin, as Berry grows LINN's net acres in that legacy oil field by about 60%. At least half of the acreage LINN picked up from Berry are also prospective for the emerging Wolfberry Trend, which adds to the deal's upside. LINN has a number of other ways to continue growing in the Permian, including following Occidental Petroleum in using carbon dioxide to recover more oil from legacy wells as production declines. Enhanced oil recovery in the Permian is Occidental's most profitable business and one that I believe we'll see LINN eventually use to keep its oil production flowing.

The final important addition is the Uinta Basin, which is a new area for LINN Energy. These are oily assets with significant production growth upside. In fact, Berry is projecting 17% annual production growth from its assets in the Uinta through 2017. There is also is potential for bolt-on acquisitions as LINN looks to consolidate its position in this new basin. 

Big upside potential
LINN bought Berry for its oil-rich cash flows that are fueled by Berry's 275 million BOE of proved reserves. However, it is estimated that these assets contain a lot more oil and gas than that. In fact, the probable and possible reserve total is estimated at 630 million BOE. That leaves significant upside potential for LINN to develop.

I've already mentioned the Wolfcamp potential in the Permian Basin, as well as future enhanced oil recovery opportunities. Outside of that, some of Berry's acreage in California is prospective for the Monterey Shale, which could be a real hidden gem for LINN investors. Berry also has upside to natural gas in the Piceance Basin of Colorado and in East Texas. Right now investors are more interested in oil-rich properties, but these assets could provide upside if gas prices rise in the future.

Investor takeaway
A new day is dawning for investors of LINN Energy and LinnCo, as the closing of the deal for Berry Petroleum really transforms the company. Investors now own a much more oil-focused company with more geographic diversity and lots of future upside. LINN's credit metrics and cash flow characteristics are both improved, making it a less risky company to own. While it might not always be a smooth ride, LINN Energy looks very well positioned to deliver solid long-term returns for its investors.


Fool contributor Matt DiLallo owns shares of Linn Energy, LLC and Linn Co, LLC. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.