Shell to go through with a $5-billion acquisition of East Resources

ShellThat the North American shale-gas production is garnering frenzied global interest is evident from the fact that Royal Dutch Shell PLC Friday announced its decision to go through with a $4.7-billion acquisition of the Warrendale, Pa.-based East Resources – a closely-held US natural-gas explorer.

East Resources happens to be one of the foremost players in the Marcellus Shale natural-gas exploration area, boasting a control of 1.25 million acres across a territory stretching from West Virginia to New York. The Marcellus, which is still in the early stages in terms of development, contains over 500 trillion cubic feet of recoverable gas.

Out of such a wide Marcellus expanse across three states, Shell has – as per the terms of the deal for East Resources buyout - grabbed 650,000 acres in Pennsylvania and West Virginia.

The East Resources acquisition marks part of a broader shale gas strategy for Shell, more so as North American natural gas presently accounts for nearly 7.8 percent of Shell’s global oil and gas production.

The acquisition, which also includes mineral rights in the Eagle Ford Shale in south Texas, will result in bountiful returns for private-equity firm Kohlberg Kravis Roberts & Co., which, less than a year back, made a $350-million investment in East Resources for a substantial stake.

In addition, the deal will also be a windfall for East Resources’ CEO Terrence Pegula, who still controls his 1983-founded company.