8:41 a.m. | Updated Chevron announced on Tuesday that it would acquire Atlas Energy for $4.3 billion, including the assumption of debt, in the most recent deal by an energy company to expand in the natural gas sector.
The deal gives Chevron a big foothold in the Marcellus Shale in southwestern Pennsylvania, which has been the focus of several deals this year.
Chevron is offering Atlas shareholders $38.25 a share in cash and a portion of more than 41 million units of Atlas Pipeline Holdings, with a value of $5.09 per Atlas Energy share. The offer totals $43.34 a share, a 37 percent premium to Atlas Energy’s closing share price on Monday — among the richer premiums being offered of late. Chevron will also take on $1.1 billion in debt.
Chevron, the second-largest energy company in the Unites States, represents a big vote of confidence in natural gas, whose prices have sagged to around $4 per million British thermal units. Chevron’s larger rival, Exxon Mobil, made a similar bet in December with its $31 acquisition of XTO Energy.
For Chevron, the allure of Atlas Energy lies in its 486,000 net acres of the Marcellus Shale, which has been a big natural gas play in the last year. Atlas will also get a 49 percent interest in Laurel Mountain Midstream, a joint venture with the Williams Companies that owns natural-gas gathering lines serving the Marcellus Shale.
“We are acquiring a company that has one of the premier acreage positions in the prolific Marcellus,” George L. Kirkland, Chevron’s 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.”
Atlas agreed in April to form a $1.7 billion joint venture with Reliance Industries of India in the Marcellus Shale, with Reliance paying $340 million in cash and another $1.4 billion in a drilling carry in return for a 40 percent stake in about 300,000 net acres of the shale holdings. Chevron will now take Atlas’s stake in that deal.
Several other deals this year have also focused on the Marcellus Shale:
— Reliance in August took a $392 million stake in fields held by Carrizo Oil and Gas and a partner.
— Consol Energy agreed in March to buy the Appalachian natural gas properties of Dominion Resources for $3.5 billion in cash. That deal gave Consol some 500,000 Marcellus Shale acres in Pennsylvania and West Virginia, tripling the company’s assets in the area.
— Royal Dutch Shell agreed in May to buy the assets of East Resources for $4.7 billion in cash, giving it 650,000 net acres of Marcellus Shale rights in Pennsylvania, West Virginia and New York.
Chevron’s deal with Atlas requires several restructuring transactions, as well as approval from Atlas shareholders and regulators.
Jefferies & Company is lead financial adviser to Atlas Energy and Deutsche Bank is co-financial adviser. Wachtell, Lipton, Rosen & Katz is the legal adviser. Chevron is being advised by Goldman Sachs and the law firm Skadden, Arps, Slate, Meagher & Flom.
