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OKLAHOMA CITY & HOUSTON--(BUSINESS WIRE)--Sept. 2,
2008--Chesapeake Energy Corporation (NYSE:CHK) and BP America
(NYSE:BP) today announced the execution of a Letter of Intent for a
joint venture whereby BP will acquire a 25% interest in Chesapeake's
Fayetteville Shale assets in Arkansas for $1.9 billion. The assets
have current daily net production of approximately 180 million cubic
feet of natural gas equivalent and include approximately 540,000 net
acres of leasehold which the companies believe could support the
drilling of up to 6,700 future horizontal wells. As a result of the
transaction, BP will own approximately 135,000 net acres of this
leasehold and Chesapeake will own approximately 405,000 net acres.
BP will pay $1.1 billion in cash at closing and will pay a further
$800 million during the remainder of 2008 and in 2009 by funding 100%
of Chesapeake's 75% share of drilling and completion expenditures
until the $800 million obligation has been funded. Chesapeake plans to
continue acquiring leasehold in the Fayetteville Shale play and BP
will have the right to a 25% participation in any such additional
leasehold. The transaction is subject to the execution of mutually
acceptable definitive documentation that the companies anticipate
executing within the next week and closing is anticipated to occur
later this month.
Aubrey K. McClendon, Chesapeake's Chief Executive Officer,
commented: "We are honored to broaden our business relationship with
BP and are excited about the mutually beneficial nature of our
transactions with them. Just a month after closing the sale of all our
Arkoma Basin Woodford Shale assets in Oklahoma to BP for $1.7 billion,
we are pleased to now announce a second major transaction with BP for
a 25% interest in our Fayetteville Shale assets in Arkansas for $1.9
billion. We believe this transaction creates substantial value for
both companies, highlights the attractiveness and significant value of
Chesapeake's assets and confirms the structural appeal of our
innovative joint venture structures.
"The PXP Haynesville Shale joint venture and the BP Fayetteville
Shale joint venture together will pay for approximately $2.5 billion
of Chesapeake's drilling and completion expenditures currently planned
for the second half of 2008 through 2010. As previously announced, we
are also pursuing a similar transaction involving our Marcellus Shale
assets with others in the industry that we hope to complete by
year-end 2008."
BP Chief Executive of Exploration and Production Andy Inglis
stated: "This transaction, when combined with our recent Woodford
acquisition, establishes a material position in the two attractive
shale plays in the Arkoma Basin. Together with our substantial
position in the emerging Haynesville Shale play in East Texas, BP has
made a strategic entry into three top tier shale plays in North
America and established potential shale resources of 1 billion barrels
oil equivalent net to BP. Development of these resources, along with
our leading position in Coal Bed Methane production, and our extensive
tight gas plays throughout North America, will enhance BP's position
as a leader in 'unconventional' gas technology and enable growth of
our North American onshore natural gas production from today's level
of 470 thousand barrels per day oil equivalent. We look forward to
working closely with Chesapeake as they develop the significant
Fayetteville play."
Chesapeake Energy Corporation is the largest producer of natural
gas in the U.S. Headquartered in Oklahoma City, the company's
operations are focused on exploratory and developmental drilling and
corporate and property acquisitions in the Fort Worth Barnett Shale,
Fayetteville Shale, Haynesville Shale, Mid-Continent, Appalachian
Basin, Permian Basin, Delaware Basin, South Texas, Texas Gulf Coast
and Ark-La-Tex regions of the United States. Further information is
available at www.chk.com.
BP is one of the world's largest oil and gas companies with
operations in more than 100 countries across six continents. The
company's main businesses are exploration and production of oil and
gas; refining, manufacturing and marketing of oil products and
petrochemicals; transportation and marketing of natural gas. Further
information is available at www.bp.com.
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The companies believe that
their expectations to conclude the documentation and closing of the
Fayetteville Shale joint venture as described are based on reasonable
assumptions. No assurance, however, can be given that such
expectations will prove to have been correct. Chesapeake cautions that
the Marcellus Shale joint venture it is pursuing may not result in a
transaction or could occur later than anticipated. See "Risk Factors"
in the respective companies' 2007 Annual Reports on Form 10-K and
other filings with the Securities and Exchange Commission (SEC) for a
discussion of risk factors that affect their businesses and could
affect the referenced joint ventures, The companies undertake no
obligation to publicly update or revise any forward-looking
statements.
CONTACT:
Chesapeake Energy Corporation
Jeffrey L. Mobley, CFA, 405-767-4763
jeff.mobley@chk.com
or
Marc Rowland, 405-879-9232
marc.rowland@chk.com
or
BP America
Daren Beaudo, 281-366-8346
daren.beaudo@bp.com
or
Marti Powers, 281-236-2283
marti.powers@bp.com
SOURCE: Chesapeake Energy Corporation