Sunday, August 3, 2008

China/Chesapeake Shale Venture?

As reported by Bloomberg last week, an article appeared in the South China Morning Post (Hong Kong), that said that the China National Petroleum Corporation is entertaining a minority investment in Chesapeake Energy's Fayetteville and Marcellus shale ventures. Anonymous sources said the talks valued Chesapeake's assets in these two plays at around $15 million.

It's interesting that Aubrey "Swift Boat" McClendon would partner with the national oil company of China, but money is money and the Chinese are known for making small minority investments in US companies at huge valuations. The net effect is that the Chinese put up lots of money for a small ownership share of a company (before the Blackstone Group IPO last year, the Chinese government, through an investment entity, invested $3 billion for about 10% (non-voting) ownership of the company).

More cash at a good price provides the fuel that the Chesapeake machine needs to attack the various shale plays in which Chesapeake is making its name. It also might play into McClendon's long term strategy to export US natural gas to foreign countries.

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