Shell in $4.7bn shale gas deal

London – Shell is to acquire subsidiaries which own substantially all of the business of East Resources, Inc. for $4.7 billion, from East Resources, its private equity investor, Kohlberg Kravis Roberts & Co. and its advisors Jefferies & Company. The deal is subject to certain regulatory approvals.

East Resources is main activity focused on the Marcellus shale, in the northeastern US and has some 650,000 net acres (2,600km2) of highly contiguous, operated acreage in the Marcellus, and 1.05 million net acres (4,250km2) of acreage overall. It also has some 60 mmscfe/d (10,000 barrels oil equivalent per day) of production, predominantly in natural gas, with substantial medium-term growth potential.

Shell has also acquired around 250,000 net acres (1,000km2) of mineral rights in the Eagle Ford shale play, in South Texas, in 2010. These undeveloped acreage positions are in the liquids rich window of the Eagle Ford play. Shell will be the operator in this highly contiguous acreage, and will be able to integrate these new assets into its existing South Texas operations, where Shell has been active for many years.

All together in 2010, Shell has added some 1.3 million acres (5,250km2) of North America tight gas acreage. Shell estimates that these new positions have the potential to yield over 16 trillion cubic feet of gas equivalent (tcfe) of resources (>2.7 billion boe).

Shell CEO Peter Voser commented: “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 Shell’s North America tight gas portfolio.

“East Resources’ 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 Shell’s technology and capabilities on a large scale.”