Shell Acquires East Resources

Chandrasekhar Atreya
29 May, 2010
New York City

Shell is expanding its portfolio in North American tight gas positions with new acquisitions in high-potential US shale gas acreage in Marcellus Shale and Eagle Ford plays.

[R]Shell is expanding its portfolio in North American tight gas positions with new acquisitions in high-potential US shale gas acreage in Marcellus Shale and Eagle Ford plays.[/R]

Amsterdam-based, Royal Dutch Shell Plc has agreed to acquire, subsidiaries which own substantially all the business of East Resources Inc, along with its private equity investor Kohlberg Kravis Roberts & Co, for a cash consideration of $4.7 billion.

Tight gas is the term used for natural gas produced from tight, low permeability formulations.

Shell is expanding its portfolio in North American tight gas positions with new acquisitions in high-potential US shale gas acreage in Marcellus Shale and Eagle Ford plays.

This transaction needs to have regulatory approvals.

Pennsylvania-based, East Resources has its primary activity focused on the Marcellus Shale, in the northeastern US with some 2,600 square kilometers of highly contiguous fields. It has overall 4,250 square kilometers of shell gas fields. It has some 60 mmscfe/day of production, predominately of natural gas, with substantial medium-term growth potential.

These fields will add to Shell’s existing South Texas assets. In addition Shell has also recently acquired 1,000 square kilometers of mineral rights in the Eagle Ford shale play in South Texas.

Marcellus shale in its infancy of development has the biggest natural gas reserves in the United States, containing more than 500 trillion cubic feet of recoverable gas stretching across three states.

All these new positions have the potential to yield over 16 trillion cubic feet of gas equivalent of resources for Shell.

Shell will continue to operate with East’s workforce to ensure continuing success in the growth and development of the reserves it will acquire after the purchase. The deal is expected to close in two phases. The first phase of the sale will be completed in mid-October. The second phase of the sale, including the sale of the West Virginia business, will close later this year, pending certain regulatory approvals.

Shell’s price was up 0.49% to 1,752.5 pence in reaction to the takeover in early trade on London’s benchmark FTSE 100 index.

East Resources is being advised by Jeffries & Co.