Mitsui Joins Anadarko For $1.4B Stake In Pennsylvania Marcellus Shale

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Purchased 32.5% WI in PA Marcellus shale, gaining 100,000 net acres.

Japanese conglomerate Mitsui & Co. Ltd. (NSDQ: MITSY) has partnered with Anadarko Petroleum Corp., The Woodlands, Texas, (NYSE: APC) to acquire a 32.5% stake in the Marcellus shale in north-central Pennsylvania for US$1.4 billion.

Mitsui, via newly established subsidiary Mitsui E&P USA LLC, will earn approximately 100,000 net acres in exchange for funding 100% of Anadarko's share of development costs in 2010, and 90% of these costs afterward. All obligations are estimated to be completed by 2013. In addition, Mitsui will have the opportunity to purchase a 32.5% share of Anadarko's existing wells and additional acreage acquisitions by reimbursing a proportionate share of Anadarko's prior expenditures estimated at approximately $100 million.

Anadarko chairman and chief executive Jim Hackett says, "This transaction reflects the significant value of Anadarko's fairway position in the Marcellus shale, which has a gross unrisked resource potential of more than 30 trillion cubic feet of natural gas and spans more than 715,000 gross acres. We continue to ramp up our activities in the Marcellus and anticipate drilling more than 4,500 wells over the coming years."

Anadarko has partnered with Mitsui in other international regions.

In a statement, Mitsui said, "We expect that this project, which is operated by technically and financially capable partners, will become a core business base for Mitsui providing cash flow and profit in the long term. Additionally, we aim to expand our shale-gas business into other areas within the U.S. and even other countries, leveraging our global network and the knowledge and know how regarding shale gas acquired through this project."

Mitsui estimates it will spend some $3 billion to $4 billion over the course of 10 years on the project with production peaking at 360 million to 460 million cubic feet per day.

Jack Aydin, senior managing director with KeyBanc Capital Markets Inc., says Mitsui is paying "a very nice price. With Anadarko Petroleum receiving $14,000 per acre, this is one of the best transactions in the Marcellus shale play to date."

The effective date is Jan. 1. Thompson & Knight LLP was legal advisor to Mitsui.

To view a map of Anadarko's Marcellus shale acreage, click here.