Chevron Agrees to Acquire Atlas Energy for $43.34 a Share
By Jim Polson - Nov 9, 2010 8:37 AM ET
Chevron Agrees to Acquire Atlas Energy for $43.34 a Share
A Chevron Corp. company logo. Photographer: Derick E. Hingle/Bloomberg
Chevron Corp., the second-largest U.S. oil company, agreed to buy Atlas Energy Inc. for $3.2 billion in cash, giving it access to the natural gas-rich Marcellus Shale formation in Pennsylvania.
Shareholders will get the $38.25 in cash plus units of an Atlas pipeline affiliate, for a total of $43.34 a share, a 37 percent premium to yesterday’s closing price, Moon Township, Pennsylvania-based Atlas said in a statement today.
The deal is worth $4.3 billion including assumed debt, the companies said. If completed, the purchase would be the third- largest for San Ramon, California-based Chevron and its biggest since the 2005 acquisition of Unocal Corp.
Atlas “has one of the premier acreage positions in the prolific Marcellus,” George L. Kirkland, Chevron vice chairman, said in a statement. “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 U.S. gas field, according to Energy Department estimates. The gas usually sells at a premium to the U.S. benchmark because wells are closer to East Coast population centers.
Reliance Agreement
Atlas reported more than 1 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 today that daily output for the third quarter rose 18 percent from a year earlier to the equivalent of 118.3 million cubic feet.
Chevron said it will assume Atlas Energy’s role in a $1.7 billion agreement announced in April with India’s Reliance Industries Ltd. to produce gas from the Marcellus Shale.
The premium for today’s deal is more than the 13 percent average for the 252 U.S. oil and gas acquisitions announced this year, according to Bloomberg data.
“I wouldn’t be surprised to see another buyer emerge,” said Scott Hanold, a Houston-based analyst for RBC Capital Markets. “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.”
Hanold rates Atlas Energy a buy and doesn’t own the shares.
Affiliate Deals
Atlas Pipeline Holdings LP will buy producing oil and gas assets from Atlas Energy for $30 million in cash and $220 million in newly issued units, the partnership said in a separate statement. After the transaction, Atlas Energy will no longer control the partnership.
Atlas Energy will buy a 49 percent stake in Laurel Mountain Midstream LLC, a pipeline system in western Pennsylvania, for $403 million in cash from another affiliate, Atlas Pipeline Partners LP, according to a statement.
The announcement was made before regular trading began on U.S. markets. Atlas shares rose $5.44, or 36 percent, to $43.16 at 8:25 a.m. in New York. Chevron fell 30 cents to $84.50.
Jefferies Group Inc. is acting as lead financial adviser and Deutsche Bank AG is serving as co-financial adviser to Atlas Energy. Wachtell, Lipton, Rosen & Katz is legal adviser to Atlas Energy.
Goldman Sachs Group Inc. is serving as financial adviser to Chevron and Skadden Arps Slate Meagher & Flom LLP is its legal adviser.
bloomberg.com |
