On February 22, Australian mining giant BHP Billiton announced that it has agreed to acquire all of Chesapeake Energy Corporation's (Chesapeake) interests in the Fayetteville Shale, Arkansas, US, including the midstream pipeline system, for US$4.75 billion. BHP Billiton expects to fund the price from its own cash resources.
According to a BHP Billiton release, Chesapeake's Fayetteville shale assets include approximately 487,000 acres of leasehold and producing natural gas properties. This is the second largest position in one of the largest gas fields in the world. This acquisition will increase BHP Billiton's net reserve and resource base by 45 percent. These assets currently produce over 400 million cubic feet of gas per day and include development options that will support substantially higher production over a 40-year operating life. BHP Billiton and Chesapeake have also agreed a 12-month services agreement to ensure the safe transfer of operations to BHP Billiton.
Transaction to be completed in H1 2011
The acquisition is consistent with BHP Billiton's strategy of investing in large, long-life, low cost assets with significant volume growth from future development, the company said, adding that the assets acquired generate strong margins and returns on capital at today's prices. Depending on regulatory approvals, BHP Billiton expects to close in the first half of 2011.
"The Fayetteville Shale is a world-class onshore natural gas resource," said J. Michael Yeager, chief executive of BHP Billiton Petroleum. "This transaction marks BHP Billiton's entry into the US shale gas business. The operated position we are obtaining will immediately make BHP Billiton a major North American shale gas producer," he added.