May 17--Rice Energy lost its bid for the Greene County gas assets of bankrupt coal miner Alpha Natural Resources.
The Canonsburg-based company that has had a relationship with Virginia-based Alpha for years -- the two partnered on another gas development venture in 2010 and Alpha's CEO has served on Rice's board -- forged an agreement with Alpha to serve as the $200 million floor bid in an auction of Alpha's gas holdings in southwestern Pennsylvania.
But it was Vantage Energy that snagged the properties, which include 27,000 acres in Greene County, for $339 million, Alpha confirmed Tuesday.
Vantage Energy, which is based in Colorado and has offices in Washington, Pa., is an independent oil and natural gas company targeting shale development, particularly in the Marcellus Shale. The company already has a position in Greene County.
Alpha said in a statement that there were five qualified bidders for the gas assets. While it didn't give names, two of them were likely EQT Corp. and Pittsburgh-based startup American Petroleum Partners, which was founded by Rice alumni. Both had expressed interest in the properties in a previous court filing.
In return for serving as the so-called stalking horse bidder, Rice will get a $2 million breakup fee and another $1.5 million to cover its expenses. The company already held a stock sale in April to raise money to pay for the acquisition.
"While we were not surprised with the interest the [assets] generated from operators in the region, the strategic sale of these assets will only help to maximize the value of the estate for the benefit of all stakeholders," said Alpha's chairman and CEO Kevin Crutchfield. "We continue to forge ahead toward the final phase of our restructuring."
U.S. Bankruptcy Court approval is required before the deal can close. A hearing is scheduled for May 26.
Gas is only a small fraction of Alpha's portfolio that was scheduled for the auction block on Monday, and the only one that actually made it there.
Alpha, which filed for bankruptcy protection in August, had planned to auction off its core coal assets as well, including the Cumberland Mine in Greene County, and operate the remaining assets to generate enough cash to cover their liabilities.
A group of its creditors made a stalking horse bid of $500 million for all the core assets, then lowered it to $325 million when gas was taken out of the equation.
But on Friday, Alpha said in a court filing that the coal auction was canceled, despite reports that other coal companies and an environmental organization had made more lucrative advances for the core mines. The company accepted the stalking horse bid for the coal assets Friday, claiming that its creditors had the only "qualified" bid on the table.
The U.S. Trustee assigned to this case has questioned the logic and viability of Alpha's plan of splitting the company in this way, saying it's not clear which non-core assets would remain with Alpha and how they could be expected to make enough money to cover the cost of remediation.
Instead of reorganization, the trustee said in a public filing, it's more appropriate to call this strategy "liquidation."
Anya Litvak: firstname.lastname@example.org or 412-263-1455.
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