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Who’s Next in the Marcellus?

http://blogs.wsj.com/deals/2010/05/28/who-is-next-to-sell-out-of-the-marcellus-shale

›May 28, 2010, 11:53 AM ET

There’s gas in them hills.

Today, Shell became the latest big energy company to make a grab for natural gas supplies in the U.S. The company is paying nearly $5 billion for closely held East Resources, which owns 1.2 million acres of the Marcellus Shale, an underground gas bubble stretching from Ohio to West Virginia and into Pennsylvania and New York.

There are at least 15 other such deals being discussed related to the Marcellus Shale, according to a person familiar with the discussions. Recent deals have included joint ventures, acquisitions of acreage and leasing rights or purchase of entire companies, like the Shell deal. The proximity of Marcellus to the natural gas guzzling customers in the Northeast make it an extremely hot commodity at the moment.

Now Exxon, Shell and Total have staked out their territories on shale gas. That means Chevron and ConocoPhillips will also likely be adding positions, according to an energy banker. China will also likely increase its position in North America, especially in Canada, says Ralph Eads, Chairman of Energy Investment Banking at Jefferies, which initiated and advised East Resources on the deal.

Since natural-gas producers in the Marcellus aren’t exactly household names, Deal Journal thought it would give you a cheat sheet on five of the big, publicly-traded players that may be in play:

• Cabot Oil & Gas operates 200,000 acres in the Marcellus Shale and has an active drilling program in the area, installing 12 wells in the first quarter. The company plans to drill a total of 81 wells in the Marcellus in 2010.

• Chesapeake Energy leases 1.5 million acres, making it the largest leaseholder in the Marcellus. In the first quarter, its net gas production in the area increased 40% from the previous quarter. Chesapeake expects to operate a total of 170 wells in 2010.

• Range Resources operates 1.3 million acres, with 900,000 of them located in what Marcellus buffs call the “Fairway,” or most productive area, of the shale in Pennsylvania. The company is predicting aggressive production growth to increase 19% this year form 2009 and increase 25% in 2011.

• Rexx Energy: In the first quarter, the company increased its holdings in Marcellus 21% from the third quarter to 60,000 acres. RBC Capital Markets analyst Leo Mariani wrote on May 6 that Rexx had ramped up two Marcellus wells, and one was a “clear outperformer.”

• Exco Resource Inc. The company has pemits to drill 60 wells in the shale this year. On May 10, Exco entered a JV with PG Group that will own 186,000 acres in the Marcellus. BG Group, a U.K-based energy company, paid Exco $950 million for a 50% stake in the JV.‹