Total to Buy Stake in Chesapeake Shale-Gas Portfolio
From the Wall Street Journal...
By GERALDINE AMIEL
PARIS-- French oil major Total SA has entered the U.S. non-conventional gas business by signing a joint-venture with U.S.-based Chesapeake Energy Corp. which will see it acquire 25% of Chesapeake's Barnett shale gas portfolio in Texas for $800 million, it said Monday.
Total has also committed to pay a further maximum of $1.45 billion over a maximum period of 6 years to fund 60% of Chesapeake's future capital expenditures on drilling and completion of wells within the framework of the joint venture.
Total and Chesapeake have also agreed to jointly study certain North American shale-gas opportunities together, the group said, without elaborating the details of the assets.
"This joint venture will provide us with a solid position in an attractive long-term resource base under competitive terms," Total's Chairman and Chief Executive Christophe de Margerie said in a statement. "It will allow Total to develop its expertise in unconventional hydrocarbons in order to expand its unconventional business worldwide."
Write to Geraldine Amiel at geraldine.amiel@dowjones.com
By GERALDINE AMIEL
PARIS-- French oil major Total SA has entered the U.S. non-conventional gas business by signing a joint-venture with U.S.-based Chesapeake Energy Corp. which will see it acquire 25% of Chesapeake's Barnett shale gas portfolio in Texas for $800 million, it said Monday.
Total has also committed to pay a further maximum of $1.45 billion over a maximum period of 6 years to fund 60% of Chesapeake's future capital expenditures on drilling and completion of wells within the framework of the joint venture.
Total and Chesapeake have also agreed to jointly study certain North American shale-gas opportunities together, the group said, without elaborating the details of the assets.
"This joint venture will provide us with a solid position in an attractive long-term resource base under competitive terms," Total's Chairman and Chief Executive Christophe de Margerie said in a statement. "It will allow Total to develop its expertise in unconventional hydrocarbons in order to expand its unconventional business worldwide."
Write to Geraldine Amiel at geraldine.amiel@dowjones.com
Views: 23
Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on -
ALongview. Did CHK "pay $30k/acre for this property"?
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Permalink Reply by ALongview on
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Didn't Total pay 30k per acre for this property. 25% stake in 300,000 acres for $800 million plus up to $1.45 billion for development over the next 6 years. If Barnett properties are selling at those types of terms then what are Haynesville properties on the block for? Thanks Skip, my first post was incorrect.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Alongview. I thought that's what you meant. I don't have specifics on the leasehold that was sold but would offer the following speculation: In the Barnett there is a wealth of data so the EUR per well is established and Total knows what they are getting. Not so in the HS. There is existing production from wells in the leasehold so Total gets immediate cash flow. Not so much in the HS. If there are producing wells then CHK has an existing pipeline system and supporting infrastructure including roads, compression and treatment facilities, salt water disposal etc. that is paid for. I think that your value comparison should take into account the tangible differences in the two plays.
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Permalink Reply by jffree1 on
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300,000 acres X .25 = 75,000 acres
$800,000,000.00 / 75,000 acres = $10,666.66/per acre
I don't think you can include the $1.45B as that is future well developement costs.
That's what I got. If anyone has a different opinion (or math) please share.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Agreed. And I think that $10,666/acre is a reasonable average price valuation at this point in the HS Play.
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Permalink Reply by JHH on
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Please connect the dots. Chesapeake selling 25% in the Barnett... selling it's "non-core" assets in the Haynesville... Sounds like the Duke brothers and the orange futures... Sell! Sell! Sell! jhh
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Permalink Reply by Skip Peel - Mineral Consultant on
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This sale is one in series of sales that CHK has used to allow it to continue drilling in a weak price environment. The first was to Plains Exploration over a year ago. The strategy is to obtain and secure through production a large leasehold in a number of shale plays.
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