2011-02-18-2011-01-31-2011-02-17
Bought 33.3% WI in 800,000-net acre leasehold in NE CO & SE WY.
Oklahoma City-based Chesapeake Energy Corp. (NYSE: CHK) and CNOOC Ltd. (NYSE: CEO) have closed a project cooperation agreement whereby subsidiary CNOOC International Ltd. has purchased a 33.3% undivided interest in Chesapeake's 800,000-net acre oil and gas leasehold in the Denver-Julesburg (D-J) and Powder River basins in northeastern Colorado and southeastern Wyoming for $570 million in cash.
In addition, CNOOC has agreed to fund 66.7% of Chesapeake's share of drilling and completion costs up to $697 million, which Chesapeake expects to occur by year-end 2014.
Chesapeake is currently utilizing five operated rigs to develop its acreage in the D-J and Powder River basins, and, with the additional capital investment from CNOOC, anticipates increasing its drilling activities to approximately 10 rigs by year-end 2011 and 20 rigs by year-end 2012.
CNOOC will have the option to acquire a 33.3% share of any additional acreage acquired by Chesapeake in the area and the option to participate with Chesapeake for a 33.3% interest in midstream infrastructure related to production generated from the assets.
Chesapeake chief executive Aubrey K. McClendon says, "This transaction will provide the capital necessary to accelerate drilling of this large domestic oil and natural gas resource, resulting in a reduction of our country's oil imports over time, the creation of thousands of high-paying jobs in the U.S. and in the payment of very significant local, state and federal taxes."
Yang Hua, CNOOC vice chairman and CEO, adds, "This second transaction with Chesapeake represents another success in our overseas development as we implement a value-driven M&A strategy. I am confident the project will not only strengthen our solid resource and production base in overseas but create value to the shareholders in the long term."
Jefferies & Co. Inc. was advisor to Chesapeake; Tudor, Pickering, Holt & Co. Securities Inc. was advisor to CNOOC.