Alpha Natural Resources, Inc. (ANR) has entered into an agreement with Rice Energy to sell its 50% stake in their Alpha Shale Resources Joint Venture (“JV”) in Marcellus to the latter.
Per the transaction, Rice Energy will pay $300 million to Alpha Natural Resources, which includes $100 million in cash and $200 million as common stock.
Rice Energy is a U.S.-based exploration and production (“E&P”) company, focusing on the acquisition and development of unconventional oil and natural gas assets. The company will offer a portion of shares from its upcoming initial public offering to Alpha Natural Resources as per the sales consideration.
Alpha Natural Resources had invested $30 million and committed 7,500 acres in the resource rich Alpha Shale JV in the Marcellus. The swap of the stake with both cash and stock in the Rice Energy IPO will lend substantial upside to Alpha Natural Resources. The company can reinvest the proceeds toward its core coal business with demand expected to rise in the near term from higher steel production.
Bristol, Va.-based Alpha Natural Resources, Inc., along with its subsidiaries, extracts, processes and markets steam and metallurgical coal in Virginia, West Virginia, Kentucky, Pennsylvania and Wyoming.
In 2010, Alpha Natural Resources and Rice Energy jointly formed the Alpha Shale Resources JV to develop the Marcellus natural gas holdings in Greene County, Pa. The JV contributed roughly $6 million to Alpha Natural Resources’ third-quarter 2013 earnings before interest, tax, depreciation and amortization. The aforesaid transaction will enable the company to accumulate funds for its growth projects alongside the ownership right to Rice Energy.
Alpha Natural Resources currently has a Zacks Rank #2 (Buy). Other stocks in the sector that are currently performing well include Abraxas Petroleum Corp. (AXAS) and Bonanza Creek Energy, Inc. (BCEI), each with a Zacks Rank #1 (Strong Buy), and Suncoke Energy Partners, L.P. (SXCP) with a Zacks Rank #2 (Buy).