Alpha consolidates shale joint venture
Alpha Natural Resources, Inc. said Wednesday that its wholly-owned subsidiary, Pennsylvania Services Corp., has acquired the 50 percent interest in its natural gas exploration and production joint venture in Greene County, Pennsylvania Land Resources Holding Company, LLC, owned by EDF Trading Resources, LLC.
ANR said in a press release the $126 million transaction, which makes PSC the sole owner and operator of the venture, allows Alpha to expand and control a highly economic natural gas development program composed of more than 25,000 net acres and associated infrastructure in the Marcellus Shale.
EDFTR and PSC initially formed the PLR joint venture in May 2013 to exploit a large, concentrated Marcellus Shale gas resource in Greene County. According to ANR, 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 said PLR’s large, contiguous acreage position will allow efficient development of the resource with long laterals, maximizing both well productivity and returns. Significant existing pipeline capacity located adjacent to or crossing PLR’s leased acreage also provides strong transportation optionality.
Brian Sullivan, Alpha’s executive vice president and Chief Commercial Officer, said the company expects to drill on the first pad within the next 30 days, with an estimated four wells to be completed by the first quarter of next year.
The company said PLR’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.”
PLR 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.
Alpha Natural Resources is one of the largest and most regionally diversified coal suppliers in the United States. While it has affiliate mining operations in Virginia, West Virginia, Kentucky, Pennsylvania and Wyoming, supplying metallurgical coal to the steel industry and thermal coal to generate power to customers on five continents, the company has been struggling along with other U.S. coal producers.
Ealier this week, ANR’s creditors hired advisers to prepare for possible restructuring talks in advance of the company’s payments on convertible bonds.
Over the past several years, it has laid off several thousand employees and idled 60 mines. It is also closing Greene County’s Emerald Mine due to geologic conditions.
On Thursday, ANR stock was trading around 28 cents per share.