By Agency Reporter

Wednesday, 10 Nov 2010

NEW YORK: Chevron Corporation, the second-largest United States oil company, agreed to buy Atlas Energy Incorporated for $3.2bn in cash, giving it access to the natural gas-rich Marcellus Shale formation in Pennsylvania, Bloomberg reported on Tuesday.

Shareholders will get $38.25 in cash plus units of an Atlas pipeline affiliate, for a total of $43.34 a share, a 37 per cent premium to Monday‘s closing price, the Moon Township, Pennsylvania-based Atlas said in a statement on Tuesday.

The deal is worth $4.3bn, including assumed debt, the companies said. If completed, the purchase would be the third-largest for the San Ramon, California-based Chevron and its biggest since the 2005 acquisition of Unocal Corporation.

Atlas ”has one of the premier acreage positions in the prolific Marcellus,” Chevron vice-chairman, George Kirkland, said in a statement, adding that, ”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.”

The Marcellus Shale stretches from Pennsylvania into New York, West Virginia and Ohio and may hold 262 trillion cubic feet of natural gas, making it the largest known US gas field, according to Energy Department estimates. The gas usually sells at a premium to the US benchmark because wells are closer to East Coast population centres.

Atlas reported more than one trillion cubic feet of natural gas reserves at the end of last year and controls 622,000 acres in the Marcellus Shale, according to its website. The company reported on Tuesday that daily output for the third quarter rose 18 per cent from a year earlier to the equivalent of 118.3 million cubic feet.

Chevron said it would assume Atlas Energy‘s role in a $1.7bn agreement announced in April with India‘s Reliance Industries Limited to produce gas from the Marcellus Shale.

The premium for today‘s deal is more than the 13 per cent average for the 252 US oil and gas acquisitions announced this year, according to Bloomberg data.

”I wouldn‘t be surprised to see another buyer emerge,” said, a Houston-based analyst for RBC Capital Markets, Mr. Scott Hanold. ”This values the company at about $9,000 an acre for a Marcellus position. Reliance paid about $14,000 an acre for the joint venture in Atlas‘s core holdings. Investors are going to want some more.”

 

Source: Punch