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Total SA, Chesapeake agree to $2.25 billion joint venture
Total SA, the French oil company, made a very strong move into the US natural gas market Monday, agreeing to a $2.25 billion deal with Chesapeake Energy Corp. Chesapeake shares jumped up 5.2%, to $27.22 in pre-market trading.
Total said it will pay $800 million in cash for a 25 per cent stake in Chesapeake´s Barnett Shale assets and an additional $1.45 billion to help fund 60 per cent of Chesapeake´s share of drilling and completion expenses.
When it is all said and done, this deal, combined with its current production, gives Total nearly 175 million cubic feet per day of natural gas.
The timing of this move is quite interesting as Exxon Mobil Corp. just agreed to drop $31 billion (all stock) on natural gas producer XTO Energy.
The timing of this move is quite interesting as Exxon Mobil Corp. just agreed to drop $31 billion (all stock) on natural gas producer XTO Energy.
Total´s CEO Christophe de Margerie responded that the deal is a “strategically important move” into the U.S. shale gas business.
For those not in the know, shale is a layered, sedimentary rock that exists in formations throughout the world. Natural gas is tightly locked in the rock formations and had been extraordinarily expensive to extract until the last few years.
The deal “will allow Total to develop its expertise in unconventional hydrocarbons in order to expand its unconventional business worldwide,” Total´s CEO said.
Chesapeake´s CEO Aubrey McClendon said the transaction boosts the company´s financial position.
The companies expect the deal will close at the end of January. Chesapeake, which is based in Oklahoma City, has struck similar partnership deals with Plains Exploration&Production Co., BP America and Statoil.
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