Chesapeake Closes $2.25B Barnett Shale JV with Total

Chesapeake Energy Corporation (CHK) today announced the closing of its $2.25 billion Barnett Shale joint venture transaction with Total E&P USA, Inc., a wholly-owned subsidiary of Total S.A. (TOT), whereby Total acquired a 25% interest in Chesapeake’s upstream Barnett Shale assets. The assets in the joint venture include approximately 270,000 net acres of leasehold in the Core and Tier 1 areas of the Barnett, approximately 700 million cubic feet of natural gas equivalent per day of current net production and approximately 3.0 trillion cubic feet of natural gas equivalent (tcfe) of proved reserves (0.75 tcfe net to Total). In addition, Chesapeake believes that this leasehold position will support the drilling of approximately 3,100 additional net locations (775 net to Total) with approximately 6.3 tcfe of unrisked unproved reserves (1.6 tcfe net to Total). 

Total paid Chesapeake approximately $800 million in cash at closing and will pay a further $1.45 billion over time by funding 60% of Chesapeake’s share of drilling and completion expenditures until the $1.45 billion obligation has been funded, which Chesapeake expects to occur by year-end 2012. 

In the framework of the joint venture, Chesapeake plans to continue acquiring leasehold in the Barnett and Total will acquire its 25% share of the new acreage on promoted terms until December 31, 2015. After such date, Total’s right to acquire its 25% proportionate share of Chesapeake’s leasehold will be on an unpromoted basis and Total will also begin paying 25% of Chesapeake’s support costs related to the joint venture’s corporate development activities. 

Aubrey K. McClendon, Chesapeake’s Chief Executive Officer, commented, “We are pleased to close our joint venture transaction with Total and look forward to creating substantial value for both companies in the years ahead. We are honored to partner with one of the largest and most respected industrial enterprises in the world to further develop the Barnett Shale. This transaction allows Chesapeake to reduce its financial leverage and future capital expenditures and further positions us to deliver industry-leading finding and development costs and returns on capital for years to come.”

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