Chevron’s Purchase of Atlas Energy Delivers Key Marcellus Assets, Production Stability, Says IHS Analysts

NORWALK, Conn.--(BUSINESS WIRE)--Chevron Corporation’s announcement yesterday that it will acquire Atlas Energy, Inc., a veteran acreage-holder in Pennsylvania’s gas-rich Marcellus shale play, for $3.2 billion in cash and assumed net debt of more than $1 billion, is a “sensible, but expensive deal,” said Robert Gillon, director of energy company research at IHS and author of the IHS Herold Quarterly and Year-end Analysis of Oil and Gas Company Stock Market Performance.

“This type of asset was missing from Chevron’s portfolio,” Gillon added. “Large projects such as Gorgon or those in the deepwater Gulf of Mexico are great, but the incremental production is lumpy. This Marcellus-type play smoothes their production profile and gives them access to significant proved reserves of 0.9 TCF and resource potential estimated by Chevron at nine TCF. They may get hit for paying too much when gas is out of favor, but I think this is a sensible deal for Chevron.”

The metrics for the total net-acquired resources, Gillon said, are in line with what other new entrants have been paying but, “it will look relatively expensive on a proved basis,” particularly given present low natural gas prices. However, he thinks it is important to go beyond the balance sheet and look at the acreage acquired and the longer term strategy for Chevron.

“We talked with Atlas management about a year ago, and we liked what we saw,” said Gillon. “They seemed both competent and efficient and, presumably, they have an advantage over latecomers to the Marcellus, they have been involved in the area for many years, so the acreage may be better situated than what others have amassed.”

Christopher Sheehan, director of M&A research at IHS and author of the IHS Herold Annual Global Upstream M&A Review, said: “Like other recent and new strategic entrants through mergers and acquisitions (M&A) into the U.S. unconventional gas market, despite persistent weak natural gas prices, Chevron is paying the required premium to purchase its way into a substantial portfolio of undeveloped unconventional gas resources. They also gain an experienced operator in a prolific shale basin, which has been pioneered by independent exploration and production companies.”

To speak with IHS analysts Bob Gillon or Chris Sheehan regarding this acquisition, please contact melissa.manning@ihs.com, or press@ihs.com.

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