Statoil is selling its Appalachian Basin natural gas E&P subsidiaries to Equitable Resources Inc. for $630 million. The Norwegian national oil company is divesting its U.S. holdings, which also include power generation and energy marketing and trading units, as part of a restructuring it announced in October. Equitable Resources will acquire Eastern States Exploration Co. and Eastern States Oil & Gas., based in Alexandria, Va. The deal will bring the Pittsburgh integrated natural gas company approximately 1.1 trillion cu. ft. of gas reserves, 6,500 production wells and 4,000 miles of pipeline in Kentucky, West Virginia, Pennsylvania and Ohio. Equitable will use a combination of debt financing and cash from high-grading its asset portfolio to fund the purchase. The addition of these Appalachian assets will more than double its gas reserves in the Northeast U.S. It also will make it the largest natural gas producer in the Appalachian Basin. Equitable's East Region assets in Appalachia currently include approximately 930 billion cu. ft. equivalent of gas reserves and 6,100 gas and oil wells in West Virginia, Kentucky, Virginia and Pennsylvania. "The combination of these assets represents the best strategic fit we have seen in the market," said Murry S. Gerber, Equitable's president and CEO. "In addition to the complementary nature of the properties, this is an extremely well-run company with low-cost operations, excellent existing production, and significant upside through a high-quality drilling inventory and land position. "Appalachian Basin drilling is extremely low-risk and both Statoil and Equitable routinely approach a 100% success rate. Consequently, this transaction helps us to achieve several goals, including increasing our revenue and net income growth while improving our return on total capital." The transaction is part of Statoil's plan to completely divest itself of Statoil Energy as the group turns its focus to its core business in Norway and other selected areas of the world. The transaction is expected to close in February. The deal also removes the Appalachian E&P assets from a pending energy IPO list. Plans were to spin the assets off, in an IPO, but were suspended when Statoil put all of Eastern States up for sale. -Nick Snow
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