BHP Billiton Ltd. (BIL), the world’s biggest mining company, has agreed to acquire Chesapeake Energy (CHK) assets in the Fayetteville Shale, USA, including the midstream pipeline system, for US$4.75 billion. The deal comes less than two weeks after PetroChina Company Limited (PTR) announced plans to spend US$5.4-billion to buy half of Encana Corp.’s (ECA) Cutbank Ridge resource in B.C.’s north east. Exxon Mobil (XOM) acquired XTO energy last year.
The acquisition would increase BHP Billiton’s net reserve and resource base by 45%. These assets currently produce over 400 million cubic feet of gas per day and include development options that will support substantially higher production over a 40 year operating life.
BHP Billiton Ltd. (BIL) also announced an Off-Market tender Buy-Back (Off-Market Buy-Back) of BHP Billiton Limited shares that will form an important part of its expanded US$10 billion capital management programme.
Chesapeake Energy (CHK) is the second largest natural gas producer in the US, only trailing Exxon Mobil (XOM), will use the money to increase production and pay down debt by 25% in the next two years, and should make investors take another look at Chesapeake Energy (CHK).
BP PLC (BP) paid US$1.9-billion for a 25% stake in Chesapeake’s Fayetteville Shale operations in 2008, a month after buying all of the company’s operations in the Woodford Shale of Oklahoma’s Arkoma Basin for US$1.75-billion. Chevron Corp. (CHV) agreed to buy Atlas Energy Inc. to add acreage in the gas-rich Marcellus Shale in the U.S. East. Exxon Mobil Corp. acquired XTO Energy Inc., a shale-gas producer, for US$34.8-billion in stock and debt in June.
Cnooc Ltd., China’s largest offshore energy producer, in January agreed to pay $570-million in cash for a one-third stake in Chesapeake’s Niobrara shale project in Colorado and Wyoming.