Friday, January 15, 2010

Good Article on Chesapeake (But What About the Tech Transfer?)

RigZone had a good recent article on Chesapeake Energy, the "company that people love to hate."  The occasion for the article is CHK's big deal with Total in the Barnett Shale, but the author takes the opportunity to review the past several years for the company. 

The past couple of years have been a wild ride for Chesapeake and CEO Aubrey McClendon himself.  The article focuses on the company's business plan of locking up lots of acreage in shale plays and then signing joint venture agreements with big international players to fund CHK's upfront costs and much of its future development costs.  It's a really smart strategy that requires huge amounts of upfront risk and very aggressive behavior.  It is also one that is difficult to replicate by others because there is only so much good land. 

While the article looked at the deals and their economics, I would have liked to know more about the technology transfer angle.  While it's not openly discussed, each deal has a "teaching component" - explicit or implicit - whereby Chesapeake shows its partner how to best identify, drill and produce these shale wells.  StatoilHydro, Total, BP and the like aren't making sweetheart deals for Chesapeake for only 20-25% of the gas output.  They are getting something else out of the deal: a game plan to replicate shale success elsewhere.

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