Monday, January 4, 2010

New Year, New Chesapeake Deal

Chesapeake Energy announced another big joint venture agreement with a European partner for some of its shale assets.  France's Total will invest $2.25 billion for a 25% stake in Chesapeake's Barnett Shale assets.  Total will pay $800 million upfront and pay the remainder over the next five to six years by funding 60% of Chesapeake's development costs. 

This is not a surprising deal given the fact that Chesapeake has made JV deals with major European companies for its other big shale plays, but it seems like a steep price for the Barnett Shale, which has become somewhat mature and often generates lower returns than other shale plays. On the other hand, it gives Total an entry into the U.S. gas market and allows it to join the club of big European companies that are learning the shale business at Chesapeake's feet.

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