Blackstone Group LP’s share price up, in talks with Shell over a $1.2bn shale gas acquisition

According to a person with knowledge of the process, Blackstone Group LP is in advanced negotiations with Royal Dutch Shell Plc over the acquisition of the latters 50% stake in a shale-gas field located in Louisiana.

The unnamed source revealed that the discussed price is about $1.2 billion. The talks are still continuing, and the terms of the deal are not entirely set, nor is the deal absolutely certain, the person said. The conclusion of talks is expected this week, with both companies refusing to comment so far.

The acquisition would transfer 50% ownership of more than 350000 acres within the Haynesville Shale to Blackstone, as Shell divests from its lower-margin North American assets.

“Haynesville has drier, less valuable gas than in places like the Eagle Ford formation in Texas or the Marcellus in the northeast. Total production reached about 10.5bcf per day in the second half of 2011, but has dropped to below 7bcf per day in the last year,” James Williams, President of WTRG Economics said for the Financial Times. “Additionally Shell has dropped plans to build a gas to liquids plant that could have used the gas from Haynesville to make more valuable products like diesel and gasoline.”

Shell has sought to sell more than 700000 acres of its shale assets in the US recently, while its Haynesville joint-venture partner, Encana, has also been divesting a significant portion of its shale portfolio.

Blackstone Group LP was 1.07% up to close at $32.98 per share on Friday, marking a one-year change of +43.27% and valuing the company at $38.06bn. According to CNN Money, 15 analysts offering 12-month price forecasts for Blackstone Group LP have a median target of $40.00, with a high estimate of $44.00 and a low estimate of $35.00. The median estimate represents a +21.29% increase from the last price of $32.98.