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CNOOC, Chesapeake close Eagle Ford shale deal

By Oil & Gas Financial Journal staff

Jefferies calls area solidly economic despite skepticism surrounding reservoir pressure

Chesapeake Energy Corp. (NYSE: CHK) and CNOOC Ltd. have closed on the project cooperation that gives CNOOC International Ltd. a 33.3% undivided interest in Chesapeake's 600,000 net oil and natural gas leasehold acres in the Eagle Ford Shale in South Texas.

CNOOC paid $1.08 billion in cash, plus an additional $40 million payment adjustment at closing. CNOOC Ltd. will fund 75% of Chesapeake's share of drilling and completion costs up to $1.08 billion, which Chesapeake expects to occur by year-end 2012.

Chesapeake’s deal with CNOOC in the Eagle Ford shale was announced in October.

The acreage is located primarily in the oil window (roughly 85%) in Dimmitt, LaSalle, Zavalla, Frio and McMullen counties.

Lower reservoir pressure has some skeptical about the value of the company’s lease position, but results from the company and the industry paint a different picture, according to an October 14 report from Jefferies & Co. Inc. The company went on to say that Chesapeake’s Eagle Ford results are “impressive” and that the area “appears to be solidly economic at $70 oil” citing its review of public data.

Fu Chengyu, chairman of CNOOC Ltd., stated, "We are delighted to close the transaction and further grow our business in line with our overseas development strategy. With our partner's expertise and experience in the shale oil and natural gas development, I believe the project will bring substantial benefits to both parties."

Chesapeake's advisor on the transaction was Jefferies & Co. Inc., and CNOOC Ltd. advisor was Tudor, Pickering, Holt & Co. Securities Inc.

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