Chesapeake Sells Arkansas Gas Interests For $4.75 Billion (updated)

Chesapeake Energy Corp. today announced it has agreed to sell its Arkansas gas interests to BHP Billiton Petroleum, a wholly owned subsidiary of BHP Billiton Limited of Australia for $4.75 billion in cash.

The deal involves Chesapeake’s interests in approximately 487,000 net acres of leasehold and producing natural gas properties in the Fayetteville Shale play in central Arkansas. Chesapeake is the second largest stakeholder in the unconventional natural gas play.

The transaction includes existing net production of approximately 415 million cubic feet of natural gas equivalent per day and midstream assets with approximately 420 miles of pipeline.

The two companies will work collaboratively for a year, while the transaction closes in the first half of this year. 

“We are pleased to announce the sale of our Fayetteville Shale assets to BHP Billiton and quickly achieve substantial progress in implementing the debt reduction targets of our previously announced 25/25 Plan," said Aubrey McClendon, Chesapeake’s CEO. "BHP Billiton is a premier global company and we look forward to working with BHP Billiton’s management to ensure a smooth transition of operations.” 

“The Fayetteville shale is a world-class onshore natural gas resource,” said J. Michael Yeager, CEO of BHP Billiton Petroleum. “The purchase of this long-life field immediately adds over 10 trillion cubic feet of gas resources to our portfolio and is consistent with our strategy of investing in large, low cost assets with significant volume growth for future development.”

Here is a sample of what analysts and reports are suggesting about BHP Billiton and its deal with Chesapeake:

Australian conglomerate BHP Billiton will bring capital might and oilfield muscle to Arkansas’ Fayetteville Shale equal to that of current Fayetteville Shale leaders – Southwestern, Exxon’s XTO Energy and Chesapeake.

The Melbourne-based industrial giant is currently the world’s largest mining company with annual revenue of nearly $60 billion and is increasingly becoming a player in the global oil and gas sector.

BHP Billiton was created in 2001 through the merger of Broken Hill Proprietary Company (BHP) and Billiton plc of The Netherlands.

Last week, the world’s fifth largest publicly traded company by market capitalization reported a 72% improvement in fiscal first-half profit to $10.52 billion in U.S. dollars. The Anglo-Australian conglomerate said it planned to spend $80 billion by 2015 on mines and oil fields.

“BHP Billiton is cautiously optimistic on the short term outlook for the global economy given the continuation of robust growth in emerging markets and further positive signs of a sustainable recovery in major developed economies such as the United States,” the company said in its second-half economic outlook on Feb. 16.