BP buys American shale assets for $1.9 billion
02 September 2008
British oil company BP PLC said Tuesday that its US unit plans to buy a 25-per cent stake in Chesapeake Energy Corp.'s Fayetteville Shale assets in Arkansas for $1.9 billion. High prevailing energy prices have recently made drilling from shale deposits profitable, something earlier considered as not worth the time and money.
BP said that a letter of intent has been signed for the deal, which comes just a month after BP America bought Chesapeake's Arkoma Basin Woodford Shale assets in Oklahoma for $1.7 billion.
"Development of these resources, along with our leading position in coal bed methane production, and our extensive tight gas plays throughout North America, will enhance BP's position as a leader in 'unconventional' gas technology…This transaction, when combined with our recent Woodford acquisition, establishes a material position in the two attractive shale plays in the Arkoma Basin," said BP Chief Executive of Exploration and Production Andy Inglis.
"Together with our substantial position in the emerging Haynesville Shale play in East Texas, BP has made a strategic entry into three top tier shale plays in North America and established potential shale resources of 1 billion barrels oil equivalent net to BP," Inglis added.
"We believe this transaction creates substantial value for both companies, highlights the attractiveness and significant value of Chesapeake's assets and confirms the structural appeal of our innovative joint venture structures," said Chesapeake CEO Aubrey K McClendon.
The deal is subject to "execution of mutually acceptable definitive documentation," which the companies expect to occur within the next week. They anticipate closing the deal later this month.