September 2008 - Chesapeake Energy Corp. and BP America intend to form a joint venture whereby BP will acquire a 25% interest in Chesapeake's Fayetteville Shale assets in Arkansas for $1.9 billion.
The assets have current daily net production of nearly 180 million cubic feet of natural gas equivalent and include approximately 540,000 net acres of leasehold which the companies believe could support the drilling of up to 6,700 future horizontal wells.
BP will own roughly 135,000 net acres of this leasehold and Chesapeake will own approximately 405,000 net acres.
BP will pay $1.1 billion in cash at closing and will pay a further $800 million during the remainder of 2008 and in 2009 by funding 100% of Chesapeake's 75% share of drilling and completion expenditures until the $800 million obligation has been funded. Chesapeake plans to continue acquiring leasehold in the Fayetteville Shale play and BP will have the right to a 25% participation in any such additional leasehold.
Aubrey K. McClendon, Chesapeake's CEO, commented, "The PXP Haynesville Shale joint venture and the BP Fayetteville Shale joint venture together will pay for approximately $2.5 billion of Chesapeake's drilling and completion expenditures currently planned for the second half of 2008 through 2010.
As previously announced, we are also pursuing a similar transaction involving our Marcellus Shale assets with others in the industry that we hope to complete by year-end 2008."