By BEN CASSELMAN

French oil company Total SA will pay $2.25 billion for a stake in a Texas natural-gas field, in the latest sign that international energy giants are scrambling to catch up after missing out on the large U.S. gas discoveries of the past decade.

Total will get a 25% stake in Chesapeake Energy Corp.'s operations in the Barnett Shale, the biggest U.S. gas field by annual production. The discovery of the Barnett near Fort Worth, Texas, in the early 2000s launched a nationwide drilling boom that uncovered huge pockets of gas in Louisiana, Arkansas, Pennsylvania and elsewhere.

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A Chesapeake gas well in the Barnett Shale formation south of Fort Worth, Texas. International firms that largely abandoned the U.S. are now trying to cash in on gas discoveries there.
TOTAL
TOTAL

Under terms of the deal, which is expected to close by the end of the month, Total will pay Oklahoma City-based Chesapeake $800 million in cash and also will pay $1.45 billion of Chesapeake's Barnett drilling costs over the next three years. The companies said they are also considering joint ventures in South Texas and in Canada.

The Total deal is Chesapeake's fourth joint-venture agreement since fall 2008, when tumbling gas prices led some analysts to predict that the debt-laden company would run out of money. Instead, Chesapeake has raised $10.8 billion through the series of deals and has begun to pay off its debt while continuing to increase its gas production.

Chesapeake said the proceeds from the Total deal would go to fund drilling and other capital expenses across the country. In a conference call with investors, Chesapeake Chief Executive Aubrey McClendon said the company's recent wells have been so successful that it would increase production by 6%-8% in 2010—the same growth rate it was predicting before selling the assets to Total. "Our production levels continue to exceed what our budgets have been predicting," Mr. McClendon said.

Total CEO Christophe de Margerie said the deal not only gives the company immediate access to a major U.S. gas field but will also help Total learn to find and develop similar fields around the world. The Barnett and other recent U.S. discoveries are so-called unconventional formations that require high-tech drilling techniques to release gas trapped in dense rock.

"[This deal] will allow Total to develop its expertise in the unconventional hydrocarbons in order to expand its unconventional business worldwide," Mr. de Margerie said in a statement.

Total is the latest global energy company to buy into the U.S. gas-exploration boom, which until recently was dominated by smaller, domestically focused companies like Chesapeake, Devon Energy Corp. and Southwestern Energy Co. European giants BP PLC and Statoil SA struck similar deals with Chesapeake in 2008, and Italy's Eni SpA last year paid $280 million for a Barnett Shale stake owned by Quicksilver Resources Inc.

Last month, Exxon Mobil Corp. agreed to pay $31 billion for Fort Worth-based gas producer XTO Energy Inc. The all-stock deal, Exxon's biggest acquisition in a decade, was widely seen as a bet that the U.S. will increasingly turn to natural gas, which burns more cleanly than coal or oil.

Analysts said there could be more deals to come as stabilizing energy prices help potential buyers and sellers agree on a price.

"There's this vibe that 2010 could be a transformational year" for the energy business, said David Heikkinen, an analyst with the energy-focused investment bank Tudor Pickering Holt & Co. in Houston. "Buyers are coming out of the woodwork."

The deals are a reversal for international giants, which largely abandoned the U.S. in recent decades in search of bigger fields overseas. In their absence, smaller companies took advantage of new technologies and easy credit to unlock new gas resources.

The discoveries led to a surge in U.S. gas production, glutting the market even as the recession was cutting into demand for all forms of energy. Natural-gas prices have fallen to under $6 per million British thermal units, less than half their level in July 2008, forcing smaller companies to scramble for cash and giving big companies a chance to come back to the U.S.

"It's just a continuation of what's happened in this business for 100 years," Quicksilver CEO Glenn Darden said.

"The smaller players find the fields; the bigger players fully develop the fields over time."

But the Total deal is also a sign that the smaller companies aren't ready to quit. Unlike XTO, Chesapeake and Quicksilver sold small pieces of their holdings to generate cash for future growth. Other companies are making similar bets; Devon announced late last year that it would sell its offshore and international assets to refocus on its onshore North American operations.

"It tells me that Chesapeake is not interested in getting out of the game anytime soon," said Dan McSpirit, an analyst with BMO Capital Markets in Denver