Exploration / Development
LONDON, Nov. 11 — StatoilHydro has ventured into unconventional gas opportunities and gas shale development under an agreement signed with Chesapeake Energy Corp., the largest US natural gas producer.
The companies have committed to jointly look for gas in China, Romania, and Ukraine, said Statoil Executive Vice-Pres. Peter Mellbye in a conference call with analysts and investors.
StatoilHydro has agreed to spend $3.38 billion for a 32.5% in Chesapeake’s gas assets in the Marcellus shale region in Pennsylvania, West Virginia, and New York. StatoilHydro said $1.25 billion would be paid in cash, and the outstanding $2.125 billion would constitute a 75% carry on drilling and completion of wells during 2009-12.
“In order to earn this carry, Chesapeake is required to maintain a significant level of drilling activity,” The Stavanger-based major added.
The acreage covers 7,300 sq km and will add future recoverable equity resources of 2.5-3 billion boe. StatoilHydro’s equity production from the Marcellus shale gas play is expected to increase to a minimum 50,000 boe/d in 2012 and at least 200,000 boe/d after 2020, with net positive cash flow from 2013. Chesapeake plans to build upon its leases in the Marcellus shale play with StatoilHydro having a right to a 32.5% interest in them.
“The agreement we have entered into with Chesapeake provides us with a solid position in an attractive long-term resource base at competitive terms,” said Helge Lund, president and chief executive officer of StatoilHydro. “This is a significant step in strengthening our US gas position, building on our existing capacity rights for the Cove Point LNG terminal, our gas trading and marketing organization, and the gas producing assets in the US Gulf of Mexico.”
The development program could support the drilling of 13,500-17,000 horizontal wells over the next 20 years, using up to 50 drilling rigs. The expected cost is estimated at $3.5 million/well, with an ultimate recovery of 560,000 boe/well.
The transaction is expected to close by yearend.
This announcement follows other recent deals that Chesapeake has struck with Plains Exploration & Production Co. and BP America to raise funds and develop its natural-gas holdings: Plains bought a 20% working interest in its assets in the Haynesville shale in north Louisiana and East Texas for $3.3 billion, and BP America acquired a 25% stake in its assets in the Fayetteville shale assets for $1.9 billion.
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