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Alliance Resource Partners to buy oil, gas mineral interests for $176M

U.S. coal producer Alliance Resource Partners LP agreed to acquire oil and gas mineral interests in the Anadarko, Permian, Williston and Appalachian shale basins for $176 million.

Under the deal, Alliance would acquire the general partner interests in AllDale Minerals LP and AllDale Minerals II LP, as well as all of the limited partner interests in the partnerships not already owned by affiliate Cavalier Minerals JV LLC. Alliance holds a 96% stake in Cavalier, which owns about 72% of the limited partner interests in AllDale. The deal would result in Alliance owning 100% of the general partner and about 97% of the limited partner interests in AllDale, according to a Dec. 17 news release.

Upon deal closing, Alliance would gain control of about 42,000 net royalty acres in the SCOOP/STACK, Delaware Basin, Midland Basin, Bakken Shale and Appalachian Basin production areas, diversifying the partnership's exposure to oil and gas producers such as Continental Resources Inc., Devon Energy Corp., Anadarko Petroleum Corp., Pioneer Natural Resources Co. and Concho Resources Inc. The deal would also provide Alliance with a new growth platform, according to President and CEO Joseph Craft III.

Alliance plans to fund the deal using cash on hand and credit facility borrowings. The deal is scheduled to close early January 2019, with an effective date of Nov. 1.

Separately, Alliance started development at Excel Mine No. 5, an extension of operations controlled by its subsidiary MC Mining LLC in Kentucky. The mine is expected to have an annual production capacity of about 1.3 million tons of high-Btu, low-sulfur coal. MC Mining, which holds an estimated 15 million tons of coal reserves assigned to the Excel Mine No. 5, will own the new mining complex. Another Alliance subsidiary, Excel Mining LLC, will be in charge of operations at the mine, consisting of continuous mining units using room-and-pillar mining techniques.

MC Mining would ship coal from the mine to transloading facilities on the Ohio and Big Sandy rivers for barge deliveries, or to customers through the CSX Corp. railroad and by truck. Alliance expects to spend about $45 million to $50 million on the mine over the next 18 to 24 months.