Shell to buy East Resources for $4.7 billion

By OGJ editors
-- Another major oil and gas company has entered a multibillion-dollar deal to acquire interests in North American unconventional resources.

Royal Dutch Shell PLC agreed to acquire the business of privately owned East Resources Inc. for $4.7 billion in a deal that includes a major land position in the Marcellus shale play of the eastern US.

Shell will pay cash to acquire East Resources subsidiaries holding the interests from East Resources and its private equity investor, Kohlberg Kravis Roberts & Co.

Based in Warrendale, Pa., East Resources has one of the largest land positions in the Marcellus shale play with 650,000 highly contiguous acres, mostly in Pennsylvania and mostly operated with high average working interests. The company also holds more than 100,000 net acres in the Niobrara shale oil play in the Rocky Mountain region.

The total land position covered by the deal is 1.05 million net acres. East Resources produces about 60 MMscfd of gas equivalent, mostly gas.

Other major oil companies that have made large deals to acquire North American unconventional resource interests include ExxonMobil Corp., with its announcement last December of a $41 billion all-stock acquisition of XTO Energy Inc., and Statoil AS, with the $3.38 billion joint venture it formed in 2008 with Chesapeake Energy Corp. in which it acquired 32.5% of Chesapeake’s Marcellus shale interests.

The East Resources deal isn’t Shell’s first venture into unconventional oil and gas.

This year, the company has added 1.3 million acres in tight sands gas interests to which it attributes potential recovery of more than 16 tcf of gas equivalent.

It also has acquired about 250,000 net acres this year in the part of the Eagle Ford shale play of South Texas that is yielding hydrocarbon liquids.

Shell also produces gas from tight sands in the Pinedale anticline in Wyoming and has tight-gas positions in South Texas, the Haynesville play of Texas and Louisiana, and western Canada.

Shell produced 810 MMcfd of gas equivalent from North American low-permeability reservoirs in 2009 at an operating cost below $2/Mcf.

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