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BG Group inks joint venture with Exco Resources to tap into US shale gas sector

London’s BG Group (LSE:BG) seems to have an insatiable appetite for gas assets, announcing another joint venture this morning with Exco Resources (NYSE:XCO) to develop gas projects in the United States.

BG Group is acquiring a 50% interest in Exco Resources’ 654,000  (net) acres in the Appalachian Basin, primarily in the states of Pennsylvania and West Virginia for US$0.95 billion.  The transaction also includes 5,900 shallow wells which currently produce around 35 million standard cubic feet per day (mmcfd).  The significance of the shallow wells is less to do with their production rates, and more to do with their ability to secure the rights to the deeper Marcellus shales. 

Shale gas is a fairly new phenomenon, after drilling and fracing technology advanced to a level to make shale gas plays economically viable.  The success of shale gas has been so significant in recent years that it has placed downward pressure on natural gas prices across the United States as gas resources and supply has risen substantially.

BG Group chief executive Frank Chapman said: "We are delighted to expand our highly successful alliance with EXCO built around complementary skills and objectives.  The new joint venture will further strengthen BG Group's unconventional gas portfolio, adding, at an attractive price, substantial resources adjacent to the premium gas markets of the US eastern seaboard.  This transaction provides critical mass to BG Group's US upstream gas business, with total resources estimated at more than 7 trillion standard cubic feet (tcf), equivalent to more than 1.2 billion barrels of oil equivalent."

Disclosure: The author holds no positions in the company