October 11, 2010
- Chesapeake Energy Corp (CHK), one of the largest land holders in the Eagle Ford Shale, announced that they will be selling a
33% stake in their acreage to China based company, CNOOC (CEO), for $1.08 billion dollars. Chesapeake Energy has mineral rights acreage in Zavala County, Webb County, and Dimmit County, LaSalle County, Frio County, and McMullen County in South Texas. The South Texas Eagle Ford Shale has been
the hottest oil plan in the United States and is the largest oil discovery in the past 40 years.
Chesapeake Energy Corporation ("Chesapeake", NYSE: CHK) and CNOOC Limited (NYSE: CEO; SEHK:00883)
today announced the execution of an agreement whereby CNOOC International Limited, a wholly-owned subsidiary of
CNOOC Limited, will purchase a 33.3% undivided interest in Chesapeake's 600,000 net oil and natural gas leasehold acres in
the Eagle Ford Shale project in South Texas. The consideration for the sale will be $1.08 billion in cash at closing, subject to adjustment. In
addition, CNOOC Limited has agreed to fund 75% of Chesapeake's share of drilling and completion costs until an additional
$1.08 billion has been paid, which Chesapeake expects to occur by year-end 2012. Closing of the transaction is anticipated
in the 2010 fourth quarter.
As operator of the project, Chesapeake will conduct all leasing,
drilling, completion, operations and marketing activities for the project. Over the next several decades, the companies plan
to develop net unrisked unproved resource potential up to 4 billion barrels of oil equivalent (after deducting an assumed
average royalty burden of 25%). Chesapeake is currently utilizing 10 operated rigs to develop its Eagle Ford leasehold and
with the additional capital from CNOOC Limited, anticipates increasing its drilling activity to approximately 12 operated
rigs by year-end 2010, approximately 31 rigs by year-end 2011 and approximately 40 rigs by year-end 2012. Approximately 900
wells are expected to be drilled by year-end 2012. Currently Chesapeake has 10 horizontal Eagle Ford wells in production with
initial production rates of up to 1,160 barrels of oil and 0.4 mmcf of natural gas per day in the oil window and 4.0 mmcf
of natural gas and 1,200 barrels of oil per day in the wet gas window. Chesapeake anticipates the project will reach its peak
production of 400,000-500,000 barrels of oil equivalent per day in the next decade.
The assets are located principally in the counties of Webb, Dimmit, LaSalle, Zavala, Frio and McMullen, and are located
primarily in the oil window (~85%) and the wet gas window (~15%) of the Eagle Ford Shale and in the dry gas window of the
Pearsall Shale. CNOOC Limited will have the option to acquire its 33.3% share of any additional acreage acquired by Chesapeake
in the area and also the option to participate with Chesapeake for a 33.3% interest in midstream infrastructure related to
production established from the assets. Full Press Release Link
