Photo by: Bloomberg
TORONTO (miningweekly.com) – Coal producer Alpha Natural Resources’ NYSE-listed stock rose by a dollar apiece after announcing on Monday that it had agreed to sell its 50% interest in the Alpha Shale Resources joint venture (JV) to partner Rice Energy for $300-million in cash and stock.
Alpha and Rice Energy entered into the 50:50 JV in 2010 to develop a portion of Alpha's Marcellus natural gas holdings in Greene county, Pennsylvania. Alpha Natural first acquired its Marcellus holdings in a 2009 merger with Foundation Coal.
"We are very pleased with the value that has been created by this JV in such a short period of time. We believe this achievement is a testament to both the quality of our Marcellus acreage and the operational excellence of the Rice Energy team," Alpha chairperson and CEO Kevin Crutchfield said.
He noted that Alpha had committed about 3 000 ha and about $30-million in cash to Alpha Shale and that the company believed the transaction provided Alpha with an excellent return on its investment, while also allowing it to retain significant upside.
Under the agreement, Rice Energy planned an initial public offering (IPO) in which Alpha would participate to the value of $200 000, and it would receive $100 000 in cash.
“Upon completion of the Rice Energy IPO, we will add a significant amount of cash to our balance sheet while also maintaining a meaningful ownership position in the growth opportunities presented by the combined Rice Energy platform,” Crutchfield said.
He noted that the company would investigate all possibilities for creating value from the balance of its Marcellus position of about 4 000 ha.
The company’s stock was trading at $7.57 apiece in the afternoon on massive volumes.