Marcellus Shale: The Price Just Went Up

Dominion Resources (D) has agreed to assign its Marcellus rights to 205,000 acres to privately held Antero Resources of Denver, Co. for $552,000 million.

Considering the accompanying 7.5% royalty override to Dominion, this transaction represents the highest amount paid to any rights holder for access to the play. The previous high price for substantial acreage was XTO's (XTO) $600 million deal for Linn Energy's (LINE) 152,000 acres in the same Southwest PA/Northern WV region but that deal was an outright purchase of all rights and existing production and included $50 million of infrastructure.

During XTO's Q1 conference call, Chairman Bob Simpson estimated that net-net, they had paid about $1000/acre for the Marcellus. I thought it was closer to $1500. In this one, Dominion retains all rights to existing production and all other formations, and will still receive about $2700/acre in cash. Dominion played this hand beautifully.

In addition, Dominion is announcing the proposed development of Dominion Keystone, a pipeline project that would transport new natural gas supplies from the Appalachian Basin to markets throughout the eastern United States

Disclosure: none

 

 

Comments

[webguy:]

$552,000 million?! Where do I sign? :)

2008 Jul 01 02:23 PM

[Paul Killinger:]

How about QRCP, Quest Resources. Aren't they buying their way in to the Marcellus play, as well...?

2008 Jul 03 10:29 AM

[Trader Tim:]

These Shale plays are going to be cash cows.....XTO stated in their last conference call that they think they paid $3 per share for Linn and they think they got the Marcellus Acrerage for free :)

Soon Cramer will be talking about the 4 horseman of Nat Gas..... Chesapeake, XTO, ?, ? I'm thinking ECA Encana could get in there and maybe Range Resources?

2008 Jul 08 03:38 PM

[bindlepete:]

Glad to see that Dominion held it's rights to the Eastern Overthrust in this region with all of the sub basement geopressured gas that lies there.

This latter is the real big long term play.

2008 Jul 08 09:39 PM

[phrockdr:]

The Marcellus Shale gas play, is just a cover for the other real money maker gas plays below it. The Marcellus layer is going to be a huge producer. and we know of all the others below Maecellus. Landowners need to join coalitions, and get and estimated $32,000 acre, and 35% royalty firm.

2008 Jul 30 11:43 PM