Royal Dutch Shell has agreed to buy East Resources, a US-based natural gas explorer, for $4.7 billion (approx. Ôé¼3.8 billion).
Warrendale, Pennsylvania-based East Resources is one of the biggest players in the natural gas exploration area known as the Marcellus Shale, which stretches from West Virginia to New York. The company controls 650,000 net acres (2,600 square kilometres) of acreage in the Marcellus, and 1.05 million net acres (4,250 square kilometres) of acreage overall.
East Resources produces around 10,000 barrels oil equivalent per day, predominantly in natural gas.
The acquisition also gives Shell 250,000 net acres of mineral rights in the Eagle Ford Shale in south Texas. Shell has said it will be the operator in the acreage, and hopes to integrate the new assets into its existing South Texas operations, where it has been active for many years.
ShellÔÇÖs chief executive officer Peter Voser commented: ÔÇ£We are enhancing our world-wide Upstream portfolio for profitable growth, through exploration and focused acquisitions, and through divestment of non-core positions. These acreage additions form part of an on-going strategy, which also includes divestments, with an objective to grow and to upgrade the quality of ShellÔÇÖs North America tight gas portfolio.ÔÇØ
Voser continued: ÔÇ£East ResourcesÔÇÖ management have built an excellent organization, with high quality assets in the Marcellus, which we are pleased to have as our centrepiece as we enter the premier shale gas play in the north east US. The opportunity now is to consolidate our tight gas portfolio, divest from non-core positions across North America, and to invest for profitable growth, by deploying ShellÔÇÖs technology and capabilities on a large scale.ÔÇØ
North American natural gas currently accounts for about 7.8 per cent of Shell's global oil and gas production. So far in 2010, Shell has added some 1.3 million acres (5,250 square kilometres) of North America tight gas acreage, and estimates that the new assets have the potential to yield over 2.7 billion barrels of oil equivalent.
The acquisition will bring ShellÔÇÖs total North America tight gas position to around 3.6 million acres. In 2009 the companyÔÇÖs North America tight gas production was about 140,000 barrels of oil equivalent per dayÔÇöan increase of 62 per cent from 2008 levels.
This will be the second biggest oil and gas deal this year, after BPÔÇÖs cash acquisition of Deepwater Assets for $7 billion in March.
Last year, Exxon Mobil, the biggest oil company in the US, agreed to buy XTO Energy, the countryÔÇÖs largest natural gas producer, for $31 billion, which gave it control of shale gas assets. And last month, India's Reliance Industries invested $1.7 billion for a 40 per cent stake in a joint venture with Atlas Energy, which controls about 584,000 acres in the Marcellus.
Foreign companies are spending billions of dollars on new drilling techniques to dislodge natural gas from shaleÔÇösedimentary rock composed of mud, quartz and calcite.
Headquartered in The Hague, the Netherlands, Shell employs around 100,000 people worldwide. Operating in over 90 countries, it produces two per cent of the worldÔÇÖs oil and three per cent of the worldÔÇÖs gas.
ShellÔÇÖs revenue in 2009 was $278.2 billion; income was $12.7 billion.
