2010-11-16-2010-11-09-2011-02-17

Closed purchase of 486,000-acre stake in PA Marcellus with exposure to Utica shale, gaining 80 Mmcf/d, 850 Bcf proved and 9 Tcfe resource potential.

On Feb. 18, global integrated energy company Chevron Corp. (NYSE: CVX) confirmed that it has acquired a 486,000-acre claim in the Marcellus shale with the acquisition of Pittsburgh-based Atlas Energy Inc. (Nasdaq: ATLS) for $4.3 billion in cash and debt.

Based on the previously disclosed estimates, San Ramon, Calif.-based Chevron paid in aggregate $43.34 per Atlas share, a 37% premium to its Nov. 8 closing price and has assumed $1.1 billion in Atlas debt. Atlas shareholders received $38.25 in cash per share plus a distribution of 41 million units of Atlas Pipeline Holdings LP (NYSE: AHD) valued at $5.09 following a restructuring.

The assets include approximately 850 billion cubic feet (Bcf) of proved gas reserves and current daily production of 80 million cubic feet of gas. Estimated resource potential is some 9 trillion cubic feet equivalent.

Atlas Energy holdings are concentrated in the Appalachian Basin, with 486,000 net acres in the Marcellus shale, 623,000 net acres in the Utica shale, and a 49% interest in Laurel Mountain Midstream LLC, a joint venture with Williams Cos. Inc., Tulsa, Okla., (NYSE: WMB)with 1,000 miles of gathering pipelines. Other assets include producing assets in the Antrim shale and 100,000 net acres in the Collingwood/Utica shale.

In April, Atlas announced a joint-venture partnership with Indian conglomerate Reliance Industries Ltd. valued at $1.7 billion in which Reliance agreed to pay 75% of Atlas' drilling costs up to $1.4 billion for a 40% interest. Chevron will now assume Atlas' 60% interest and operatorship.

Goldman, Sachs & Co. is financial advisor to Chevron and Skadden Arps Slate Meagher Flom LLP is legal advisor. Jefferies & Co. Inc. and Deutsche Bank Securities Inc. are financial advisors to Atlas Energy, and Wachtell, Lipton, Rosen & Katz is legal advisor.

Previously, KeyBanc Capital Markets analyst Jack Aydin valued the deal at $4.22 per proved reserve and $36,353 per flowing Mcfe. "Given the early stage of Atlas in the Marcellus, the deal metrics are difficult to compare relative to other companies in our universe; nevertheless, we believe Atlas received a great value in this depressed natural gas environment relative to our hard NAV of $32.63 per share," he said.

Michael Hall, Wells Fargo Securities Inc. analyst, also noted that based on prior estimates, the deal represented 14.1x EV/EBTIDAX, $4.14 per Mcfe of 2009 proved reserves, about $37,250 per Mcfe per day, and a 17% premium to the Wells Fargo strip-based NAV. "On core acreage alone the deal represents approximately $14,360 per acre, after factoring in proved reserves, drilling program value, as well as AHD/APL ownership. We note that the transaction only represents a 13% premium to the year-to-date high seen just after the Reliance JV announcement," he said.