East Resources, a Pennsylvania oil and gas exploration company
started locally in 1983, is being purchased by Shell for a
whopping $4.7 billion, the companies announced Friday.
Terrence Pegula, chief executive of East Resources, is formerly
of Allegany, N.Y.
The company, now based in Warrendale near Pittsburgh, is one of
the biggest players in the natural gas exploration of the Marcellus
Shale, controlling 1.25 million acres across an area from West
Virginia to New York.
Eleven months ago, private equity firm Kohlberg, Kravis, Roberts
& Co. invested $350 million for a substantial stake in East
Resources
The sale includes East’s natural gas and oil exploration and
production operations and most of its holdings in related
businesses. With the purchase of East Resources, Shell — Europe’s
largest oil company — will acquire approximately 650,000 net acres
of Marcellus Shale rights in Pennsylvania, West Virginia and New
York, and 1.05 million acres in total.
East Resources has been one of the Appalachian Basin’s most
active exploration and production companies for more than 25 years.
Since its inception, East has grown primarily through its
exploration successes, several acquisitions, and most recently the
development of the Marcellus Shale.
East Resources employs approximately 300 office and field
personnel in Pennsylvania, West Virginia, New York and Colorado.
Its principal offices are located in Warrendale, Broomfield, Colo.,
and Parkersburg, W.Va. Shell will
continue to operate with East’s workforce to ensure continuing
success in the growth and development of the reserves it will
acquire in the purchase. East Resources has some 60 mmscfe/d
(10,000 barrels oil equivalent per day) of production,
predominantly in natural gas, with substantial medium-term growth
potential.
The sale of East Resources to Shell is expected to close in two
parts. The first part of the sale will be completed in mid to late
summer. The second part of the sale, including the sale of the West
Virginia business, will close later this year, pending certain
regulatory approvals.
“The sale of the company to Shell will ensure that the capital
needed to develop East’s significant Marcellus Shale holdings will
be available,” says Pegula. “Shell’s entry into the region should
benefit Pennsylvania, West Virginia and New York through
significant new capital investment, new jobs and new business
opportunities. I am very proud that this transaction has brought
Shell into the Appalachian Basin.”
President of Shell Oil Co., Marvin Odum commented, “East
Resources’ management has built an excellent organization which we
are pleased to have as we enter the northeast U.S. and specifically
the Marcellus Shale play.”
East Resources is being advised in the sale of the company by
Jefferies & Co., a leading financial advisor and major global
securities and investment banking group.
East Resources began in 1983, and drilled its first operating
properties in Warren and Indiana counties in 1984, later expanding
to McKean County and into West Virginia. In 1996, the company
installed and began operating a natural gas processing facility in
northern Pennsylvania.
In 2000, East acquired the remaining assets of Pennzoil in the
Appalachian Basin from Devon Energy Corp. Extensive lease
acquisition and 3D seismic programs for deep gas drilling begin in
south central New York and north central Pennsylvania.
In 2004, East opened an office in Denver, Colo., and in 2005, in
Wyoming.
In 2007, East acquired controlling interest in Vineyard Oil
& Gas, a marketer of natural gas, and Elkhorn Holdings LLC.
By 2008, when the company celebrated its 25th anniversary, East
employed 250 people.
