Alpha Natural Resources buys out EDF to acquire full ownership of Marcellus properties

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In a $126 million deal, the mining company Alpha Natural Resources has bought out its partner, EDF Trading Resources, in the natural gas exploration and production joint venture, Pennsylvania Land Resources Holding Company. Following the transaction, Alpha Natural Resources, through its wholly-owned subsidiary, Pennsylvania Services Corporation (PSC), becomes the sole owner and operator of the venture.

EDF Trading Resources is a subsidiary of EDF Trading, a leading provider of market services to the wholesale gas and power sectors in the US and Canada, which is a subsidiary of EDF Group (EDF), Europe’s leading electricity producer.

 

The buy-out was prompted by the decision made by EDF Group fto exit North American upstream exploration and production (E&P) activities.

According to the company statement, the move allows Alpha to expand and control a highly economic natural gas development program composed of over 25,000 net acres and associated infrastructure in the Marcellus Shale.

EDF Trading Resources and Pennsylvania Services Corporation initially formed the Pennsylvania Land Resources joint venture in May 2013 to exploit a large, concentrated Marcellus Shale gas resource in Greene County, Pennsylvania. The concentrated acreage position is considered to be in the “core of the core” of the Marcellus Shale, one of the most profitable natural gas plays in the United States, and located adjacent to some of the most productive wells in the basin to date.

Alpha hopes that it’s newly acquired large, contiguous acreage position will allow for efficient development of the resource with long laterals, maximizing both well productivity and returns. Significant existing pipeline capacity located adjacent to or crossing its subsidiary’s leased acreage also provides strong transportation optionality.

Brian Sullivan, Alpha’s Executive Vice President and Chief Commercial Officer, stated, “We expect drilling on the first pad to begin in the next 30 days, with an estimated 4 wells completed by the first quarter of next year.”

Pennsylvania Land Resources’s concentrated position when it entered into the joint venture in May 2013 was 12,000 net acres, which has since more than doubled. Additionally, two well-pads have been constructed with a total of 14 permitted wells. “Our current leasehold position gives us an immediate drilling inventory of more than 50 locations,” Sullivan added.

Alpha Natural Resources Chairman and CEO Kevin Crutchfield also emphasized the growth potential associated with the transaction. “Alpha has broad resource experience already in this basin and this acquisition positions us to derive exceptional future value from these gas assets and operational benefits with our existing coal operations.”

Pennsylvania Land Resources also controls rights to develop gas resources located at other depths, including the deeper Utica Shale, on the majority of the leased acreage and several adjoining properties.

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