Published in the Pittsburgh Tribune-Review, by Timothy Puko

January 29, 2014

A slate of big-dollar deals returned to the Marcellus shale late last year, with more than $1 billion spent on mergers and acquisitions in three months for the first time since the spring of 2012.

Companies are looking to capitalize on the steady improvement in the region's natural gas production and growth in customers. Drillers are benefiting from bountiful wells that are producing more gas than expected and at lower costs as well as a buildup in pipelines for delivery, said Doug Meier, U.S. energy sector deals leader at Pricewaterhouse Coopers LLP.

“If you put those two things together, you've got a pretty substantial improvement in cash flow coming out of those wells,” said Meier, whose accounting firm released its quarterly analysis of oil and gas deals on Tuesday.

There were four deals for Marcellus land from October through December. They totaled $1.14 billion, about the same as the prior nine months combined. Property in the gas-rich Utica shale accounted for about $284 million in two deals.

Local deal-making benefited from a national trend, said PricewaterhouseCoopers. More oil and gas companies were selling off ancillary property to raise cash and boost their balance sheets and share prices.

The two biggest Marcellus shale deals both fit that category, according to IHS Inc., an energy research and consulting firm that tracks these deals. Chesapeake Energy Corp. sold wells and leases from eastern Pennsylvania to a partnership led by Chief Oil & Gas LLC for $500 million. Rice Energy Inc. gave a package worth $300 million to buy out joint-venture partner Alpha Natural Resources Inc. as Rice went public.

Deal-makers in oil and gas had focused on oil-rich areas in recent years, but parts of the Marcellus have liquid gases like propane and ethane, and easier access to populated eastern markets that have helped it compete for investors' attention. In addition to all the pipelines, growing momentum for natural gas exports has pushed up interest, too, said Christopher Sheehan, director of mergers and acquisition research at IHS Herold in Connecticut.

“It's one of the few gas basins in the U.S. right now where we did see a pickup in upstream deal activity,” he said. “There were pretty strong well economics in the (area) where the deals were.”

(Timothy Puko, "Marcellus shale responsible for $1.14B in deals," 1/29/14)