Walter Energy Announces Alabama Expansion Initiatives
Thursday, April 29th, 2010
Walter Energy (NYSE: WLT), a leading U.S. producer and exporter of premium hard coking coal for the global steel industry, announce several key steps in its execution of a long-term strategy for expanded coking coal production.
“Today’s announcements truly set the stage for the next evolution of Walter Energy,” said Joe Leonard, interim Chief Executive Officer of Walter Energy. “We are thrilled at the opportunities these initiatives present to grow our reserve base and production footprint in Alabama and we will continue to explore opportunities to grow our natural resources and energy enterprise.”
Agrees to Acquire HighMount Exploration & Production LLC’s Alabama Coal Bed Methane Operations
The Company announced that Walter Natural Gas, LLC, a wholly owned subsidiary, has entered into a definitive purchase agreement to acquire the Alabama natural gas interests of HighMount Exploration and Production LLC, for approximately $210 million in cash. The transaction is expected to close in the second quarter 2010 and is subject to a number of customary closing conditions.
“Acquisition of these gas assets is extremely important to Walter Energy’s coal production growth strategy, helping to ensure that future coal production areas are properly degasified, thereby improving safety and operational efficiency,” said Walter Energy President and Chief Operating Officer George R. Richmond. “In addition, on a stand-alone basis, the assets provide long-life, low-cost production, stable cash flows and are complementary to our existing gas business.”
The acquisition includes HighMount’s Alabama coal bed methane operations, including approximately 1,300 existing conventional gas wells, pipeline infrastructure and related equipment located adjacent to the Company’s existing underground mining and coal bed methane business located in Tuscaloosa County, Alabama. Current proven reserves are approximately 190 bcf (billion cubic feet), with current annual coal bed methane production of 8.5 bcf. The purchase price equates to approximately $1.10 per mcf of proven reserves, and the acquisition is expected to be accretive to Walter Energy’s 2010 earnings. The acquisition more than doubles the Company’s annual coal bed methane production to over 14 bcf. Approximately 50 of HighMount’s Alabama employees are expected to join the Company upon closing of the transaction.
Signs Letter of Intent to Lease Chevron Mining, Inc.’s Blue Creek Coal Reserves; Acquire North River Mine
Walter Energy has signed a non-binding letter of intent to lease approximately 52 million tons of Blue Creek coking coal reserves in Tuscaloosa County, Alabama and acquire the existing North River steam coal mine in Fayette County and Tuscaloosa County, Alabama from Chevron Mining, Inc., a subsidiary of Chevron Corporation.
“Chevron’s Blue Creek reserves are high-quality, high-vol coking coal and, if consummated, this acquisition gives us opportunities to blend this coal with coal from our No. 7 Mine to make an outstanding hard coking coal product, similar to that from our No. 4 mine,” said Richmond.
“We are optimistic that we will be able to consummate this transaction in the near term,” said Leonard. “With this transaction, we are rapidly closing in on the last remaining reserves of coal from Alabama’s Blue Creek seam and some of the highest quality coking coal in the world.”