Chevron buys Atlas with an eye towards natural gas
Chevron will acquire Atlas Energy for cash of $3.2 billion and assumed pro forma net debt of approximately $1.1 billion. The acquisition will provide Chevron with an attractive natural gas resource position primarily located in southwestern Pennsylvania's Marcellus Shale. The acquisition is subject to certain Atlas Energy restructuring transactions, approval by Atlas Energy shareholders and regulatory clearance.
"This acquisition is the right opportunity for Chevron," said George L. Kirkland, Chevron vice chairman. "We are acquiring a company that has one of the premier acreage positions in the prolific Marcellus. The high quality resource, competitive cost structure in the Marcellus, strong growth potential of the asset base and its proximity to premier natural gas markets make this targeted acquisition a compelling investment for Chevron."
When the transaction closes, Chevron will gain Atlas Energy's estimated nine trillion cubic feet of natural gas resource, which includes approximately 850 billion cubic feet of proved natural gas reserves with approximately 80 million cubic feet of daily natural gas production. The assets in the Appalachian basin consist of 486,000 net acres of Marcellus Shale; 623,000 net acres of Utica Shale; and a 49 percent interest in Laurel Mountain Midstream, LLC, a joint venture which owns over 1,000 miles of intrastate and natural gas gathering lines servicing the Marcellus. Assets in Michigan include Antrim producing assets and 100,000 net acres of Collingwood/Utica Shale.
In April 2010, Atlas Energy entered a joint venture to develop its Marcellus assets with a wholly owned affiliate of Reliance Industries Limited. Under the agreement, Chevron will assume Atlas Energy's role as operator with 60% participation in the Marcellus joint venture, under the original agreement terms between Atlas Energy and Reliance. Reliance will continue to fund 75% of the operator's drilling costs, up to $1.4 billion.
Under the terms of the agreement, Atlas Energy shareholders will receive $38.25 in cash for each share of Atlas Energy stock and a pro-rata distribution of over 41 million units of Atlas Pipeline Holdings, L.P. following certain restructuring transactions to be completed immediately prior to the merger closing. Based on AHD's most recent closing price on November 8, these units will have a value of $5.09 per Atlas Energy share.
Comments