Site of proposed Shell ‘cracker’ plant across from Beaver and Vanport
Shell Acquires Pennsylvania Shale Gas Rights as Part of a $2.1B Deal
By Alex Nixon
Aug. 14, 2014 – Royal Dutch Shell is shuffling its portfolio of natural gas holdings to increase attention on the Marcellus and Utica shale formations in northern Pennsylvania.
The energy giant announced on Thursday that it is selling drilling rights to mature gas producing areas in Wyoming and Louisiana in separate deals in exchange for $2.1 billion in cash and 155,000 acres in Potter and Tioga counties, where it operates gas wells.
The announcement followed a deal on Tuesday in which Shell said it was selling 208,000 acres in Western Pennsylvania and eastern Ohio to Rex Energy for $120 million.
“They already know what they have” in Potter and Tioga counties, said Lyle Brinker, director of equity research at IHS Energy in Norwalk, Conn. “It’s an area where they already know what they’re getting into.”
Shell spokeswoman Destin Singleton said the seemingly contradictory moves in Pennsylvania are part of the company’s regular review of its mix of energy production assets to improve value for its shareholders. Shell is working to focus its onshore drilling program on a few of the more prolific formations in an effort to boost profitability. The company wrote down the value of its shale acreage in the United States by $2.1 billion last year amid lower natural gas prices.
“We continue to restructure and focus our North America shale oil and gas portfolio,” Marvin Odum, Shell’s Upstream Americas Director, said in a written statement. “We are adding highly attractive exploration acreage, where we have impressive well results in the Utica, and divesting our more mature, Pinedale and Haynesville dry gas positions.”
In one of the two deals announced on Thursday, Shell said it will sell its Pinedale acreage in Wyoming to Houston-based Ultra Petroleum for $925 million plus the land in Potter and Tioga counties. Shell and Ultra have been partners in a joint venture in northern Pennsylvania. Shell will acquire 100 percent of the joint venture.
In the second deal, Shell will sell its gas assets in northern Louisiana, known as Haynesville, to Dallas-based Vine Oil & Gas LP for $1.2 billion.
Shell and other major oil and gas explorers regularly sell rights to fields where production is flat or declining. They then use that cash to fund exploration programs designed to discover new or more prolific fields that oil giants need to fuel growth. The Pinedale and Haynesville formations produce dry gas, which is less profitable than oil or so-called natural gas liquids, at relatively moderate rates.
“It’s a good sign that they’re still committed to the Marcellus,” Brinker said.