Chesapeake Energy Corp., Oklahoma City, (NYSE: CHK) plans to acquire Columbia Natural Resources LLC and certain affiliated entities from West Virginia-based Triana Energy Holdings LLC for $2.2 billion in cash, the assumption of an estimated $75 million working capital deficit and liabilities related to CNR's prepaid sales agreement and hedging positions. Chesapeake will finance the acquisition from cash on hand and by issuing a combination of senior notes and equity securities. Closing is expected by Dec. 15. Morgan Stanley & Co. Inc. and Credit Suisse First Boston LLC advised Triana. Chesapeake anticipates acquiring an estimated 2.5 trillion cubic feet of natural gas equivalent (Tcfe) of proved, probable and possible (3P) reserves, comprised of 1.1 Tcfe of proved reserves and 1.4 Tcfe of probable and possible reserves. CNR's 3P reserves are estimated to be 3.9 Tcfe, or 56% more 3P reserves than Chesapeake will initially recognize. CNR's current daily net production is approximately 125 million cubic feet of natural gas equivalent (MMcfe), indicating a proved reserves-to-production index of 23 years and a proved developed reserves-to-production index of 16 years. The properties are principally in West Virginia, Kentucky, Ohio, Pennsylvania and New York. After the preliminary allocation of $175 million of the $2.2 billion purchase price to CNR's midstream gas assets being acquired and $500 million to the unevaluated portion of the 4.1 million net leasehold acres being acquired -- 3.5 million net acres in the U.S. and 0.6 million net acres in Canada -- Chesapeake's acquisition cost for the 1.1 Tcfe of estimated proved reserves will be about $1.45 per thousand cubic feet of gas equivalent (Mcfe). Chesapeake estimates that its all-in cost of acquiring and developing the 2.5 Tcfe of reserves will be about $2.48 per Mcfe. CNR's proved reserves are long-lived, have low production decline rates, are 99% gas, have an average Btu content of 1,140 and are 70% proved developed. Chesapeake has identified 1,316 proved undeveloped (PUD) locations, 6,286 probable locations and 1,833 possible locations for a total of 9,435 undrilled locations, or an estimated drilling inventory of more than 15 years. As of June 30 and pro forma for this acquisition, Chesapeake will own an internally estimated 13.5 Tcfe of proved and unproved oil and gas reserves, comprised of 7.1 Tcfe of proved reserves (92% gas, 100% onshore) and 6.4 Tcfe of unproved reserves. The company intends to spend at least $200 million per year for the foreseeable future to develop the acquired properties. Aubrey K. McClendon, Chesapeake's chief executive, says the acquisition will be a significant addition to existing land and gas resource inventories. It represents an opportunity to move into "the large, prolific and generally underexplored and unconsolidated Appalachian Basin... we are also attracted to the value proposition of producing natural gas at a premium price to Nymex. "In addition, we are eager to begin working in a large U.S. natural gas basin that shares many similarities to our stronghold in the Midcontinent." Triana was formed in 2001 by management and executives of Metalmark Capital LLC as a Morgan Stanley Capital Partners portfolio company.