Replies to post #584 on The Rising Influence of Rising Affluence

[DewDiligence]

Thanks for that info. Regards, Dew

[DewDiligence]

APC, Mitsui Ink Marcellus Deal

[This is an impressive deal for APC; if one allocates the value Mitsui is paying to all 250K of APC’s Marcellus acres, the roughly $4.5B figure comes to about 10% of APC’s (IMO bloated) enterprise value of roughly $45B on a fully-diluted basis. I thought APC was a strong buy in the 40’s and low 50’s (especially if one accepts the outsized pre-salt GoM valuation cited by FMR: #msg-41185882); however, at 70 and change, I think APC’s valuation has gotten ahead of the fundamentals, notwithstanding the Marcellus assets. Comments?]

http://www.reuters.com/article/idAFN1622940220100216

›By Anna Driver

HOUSTON, Feb 16 (Reuters) - Anadarko Petroleum Corp <APC.N> signed Mitsui E&P USA LLC as its joint venture partner in a $1.4 billion deal to explore for natural gas in the Marcellus Shale in Pennsylvania.

In recent years, there have been a number of joint-venture deals between U.S. exploration companies and foreign companies seeking the acreage and expertise needed to develop North America's vast shale formations.

The deal is viewed as a positive for Anadarko, because it "highlights the value of the company's Marcellus position, which has largely been overlooked and undervalued by the Street," energy research company Simmons & Co International told clients.

The venture lifts the value of Anadarko's Marcellus acreage to about $4.5 billion, up from $1.2 billion, Simmons said.

Shares of other companies with holdings in the Marcellus jumped on the news. Range Resources Corp <RRC.N> shares rose nearly 6 percent, while Chesapeake Energy Corp <CHK.N> shares climbed nearly 4 percent.

The Marcellus Shale, which spans parts of Pennsylvania, West Virginia and New York, could hold enough gas to satisfy U.S. demand for a decade, according to some geologists.

But debate over drilling in the region has sharpened in recent months. Environmentalists claim the drilling fluids needed to crack the rock and free the gas can contaminate drinking water, an assertion the industry hotly disputes.

Under the deal, Mitsui E&P, a unit of Mitsui & Co Ltd will take a 32.5 percent stake in Anadarko's Marcellus Shale assets, primarily located in north-central Pennsylvania, the companies said on Tuesday.

Mitsui will earn about 100,000 net acres in exchange for funding 100 percent of Anadarko's share of development costs in 2010, and 90 percent of these costs thereafter. All obligations are estimated to be complete by 2013.

"The deal's good for Anadarko because it frees up cash that can be redeployed into their aggressive offshore exploration and development programs," Evan Smith, co-manager of the U.S. Global Investors Global Resources Fund, said in an email.

In recent months, Anadarko has announced a number of big offshore oil discoveries in west Africa and the Gulf of Mexico.

Mitsui will also have the opportunity to buy a 32.5 percent share of Anadarko's existing wells and additional acreage by reimbursing a proportionate share of Anadarko's prior expenditures, currently estimated to be about $100 million.

Following the Mitsui joint venture, Anadarko will have a net acreage position of about 250,000 acres in the Marcellus Shale.‹