Fayetteville shale assets Chesapeake's Fayetteville shale assets include approximately 487,000 acres of leasehold and producing natural gas properties located in Arkansas. 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%. These assets currently produce approximately 415 MMcf/d and include development options that will support substantially higher production over a 40 year operating life. The assets include 2.4 Tcf of proved reserves and 10 Tcf of total risked resource potential. The transaction also includes midstream assets with approximately 420 miles of pipeline.
It’s a material asset with room to grow:
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. BHP said it is paying $1.77/Mcf of proved reserves which is consistent with the recent ExxonMobil’s acquisition of Petrohawk’s Fayetteville assets for $1.92/Mcf. BHP aims to triple daily production from the new asset as the field is developed, and plans to spend $800 million to $1 billion a year over 10 years to develop the field, BHP chief Michael Yeager said.
Unconventional gas to quench the thirst of US gas demand:
Chesapeake says, “Enormous value created through JV transactions – More to come in 2011”
This Fayetteville transaction is in line with Chesapeake’s 2011-12’s “25/25” plan, ie., reducing debt by 25% by selling assets, while increasing production by 25%. Chesapeake’s drilling capital to be invested in liquid plays will move from 10% in 2009 to 70% in 2012. In 2010, Chesapeake invested ~$5.0 billion of leasehold in liquids-rich plays which will be largely recovered from JV partners in next few years. In the past two years, Chesapeake has created enormous value through JV transactions and more to come in 2011…