Natural resources giant BHP Billiton (LON:BLT) has agreed a deal to buy Chesapeake Energy Corp’s interests in the Fayetteville Shale, US, including the midstream pipeline system, for US$4.75bn. BHP said the acquisition was consistent with its strategy of investing in large, long-life, low cost assets with significant volume growth from future development. The group said the move also supported its goal of diversification by geography, customer and product – marking BHP’s entry into the US shale gas business with the second largest position in one of the largest gas fields in the world. The BHP Billiton share priced edged down slightly during the morning to 2,363p.
BHP Billiton will become the operator of Chesapeake’s operated interests in the field, covering approximately 487,000 acres of leasehold and producing natural gas properties located in Arkansas, US. The acquisition will increase BHP’s net reserve and resource base by 45%. The 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 and Chesapeake have also agreed a 12 month services agreement to ensure the safe transfer of operations to BHP.
BHP said it expected to fund the acquisition from its own cash resources. The assets acquired generate strong margins and returns on capital at today’s prices. Depending on regulatory approvals, BHP expects to close in the first half of 2011.
J. Michael Yeager, the chief executive of BHP Billiton Petroleum, said: “The Fayetteville Shale is a world-class onshore natural gas resource. The operated position we are obtaining will immediately make BHP Billiton a major North American shale gas producer. It provides access to a competitive, long-life resource basin that benefits from our ability to invest through the economic cycles. Longer term, the expertise we gain here will be usable elsewhere as we continue to grow our business.”
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