May 17, 2016 4 min read

WAYNESBURG – Alpha Natural Resources announced Tuesday that the successful bidder for its natural gas assets in Greene County is Vantage Energy, which outbid Rice Energy for the rights.

Vantage Appalachia II LLC submitted a cash bid of $339.5 million for Alpha’s oil and natural gas assets, an amount far exceeding a stalking horse bid received earlier from Rice Energy Inc. for $200 million.

The assets were sold at an auction Monday as part of Alpha’s bankruptcy restructuring plan.

The assets, referred to as the “PLR assets” owned by Alpha subsidiary Pennsylvania Land Resources LLC, include leasehold interest in 27,400 acres of undeveloped Marcellus and Utica shale property in Greene County and an additional 3,200 gross acres owned in fee that are now under lease and generating royalty cash flow.

“While we were not surprised with the interest the PLR 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 Kevin Crutchfield, Alpha’s chairman and chief executive officer. “We continue to forge ahead toward the final phase of our restructuring.”

An auction of the company’s core coal assets, including the Cumberland and Emerald mine properties in Greene County, also scheduled for Monday, was cancelled.

Alpha filed a motion in bankruptcy court Friday stating the stalking horse bid it had received from its first-lien lenders for the coal assets was the only “qualified bid” it received for the properties.

Under Alpha’s bankruptcy restructuring plan, the company initially was to sell all its core assets, coal and natural gas, to the first-lien lenders under a stalking horse bid of $500 million. Non-core assets are to remain with the company to generate revenue to fulfill the company’s environmental reclamation obligations.

The company’s natural gas assets were later removed from the first-lien lenders’ bid when Rice Energy agreed to purchase them through a stalking horse bid of $200 million. However, Rice’s bid was subject to higher and better offers from competing, qualified bidders.

Bankruptcy court approval is required before the sale of the assets can close. A hearing on this matter is currently scheduled for May 26.

Because no other “qualified bid” was received for the coal assets, the assets will go to the stalking horse bidder. The first-lien lenders’ stalking horse bid was reduced to $325 million with the removal of the natural gas assets, the company said.

In documents filed with the bankruptcy court, the company said it had contacted about 150 potential buyers for the assets, received about 15 preliminary expressions of interest for some or all of the assets and received six final bids, five of which were for the PLR assets.

The Alpha board of directors did not qualify any competing bids, other than those for the PLR assets, it said.

The alternative bids provided no additional value, were not economically viable, contained speculative financing or increased the risk to completing the restructuring, it said.

As a result, except with respect to the PLR Assets, the proposed auction of the core coal assets was cancelled and a notice filed designating the stalking horse bid as the successful bid for those assets.

The company also last week received bankruptcy court approval to terminate its contract with the 580 employees at the Cumberland Mine represented by the United Mine Workers and modify its obligations for retirement benefits.

The employees continue to work under terms of the terminated contract, UMWA spokesman Phil Smith said. Alpha also continues to make contributions to the employees’ retirements plan, he said.

The court order gives Alpha the authority to reject current union contracts and modify union retiree benefits, the company said.

“The timing and implementation of such actions, however, are still subject to company discretion, based upon further planning and analysis,” the company said. “In the interim, we continue to engage in good faith with the UMWA in an effort to finalize a negotiated, mutually-acceptable agreement.”

Smith said the union is negotiating with the first-lien lenders, however, it is still uncertain whether the first-lien lenders will ultimately acquire Alpha’s coal properties.

“That will be up to the judge,” he said.