Chesapeake Energy (CHK) announced today that it will create a joint venture with the US division of BP plc (BP) that will give BP a 25% stake in Chesapeake’s Fayetteville Shale assets in exchange for $1.9 billion. Following the transaction, BP will own about 135,000 net acres of Chesapeake’s current 540,000 net acre leasehold.
As part of the deal, BP pays $1.1 billion up front, in cash, at closing, and the remaining $800 million by funding drilling and completion expenses through the rest of 2008 and into 2009, until the money runs out. But that’s not the best part for BP. If Chesapeake acquires any future leaseholds in the Fayetteville Shale play, "BP will have the right to a 25% participation in any such additional leasehold."
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