China's largest offshore oil and natural gas producer is paying more than $2 billion for a stake in Chesapeake Energy Corp.'s leasehold in south Texas' Eagle Ford Shale.
CNOOC Limited has agreed to pay Chesapeake $1.08 billion for an interest in the Oklahoma City-based company's 600,000 net acres in the Eagle Ford, according to the joint venture announced Sunday.
CNOOC also will pay 75 percent of Chesapeake's drilling and completion costs in the area until it has paid another $1.08 billion. Chesapeake expects that to occur by the end of 2012.
The deal is Chesapeake's fifth shale development transaction, totaling about $13 billion.
"This transaction will provide the capital necessary to accelerate drilling of this large domestic oil and natural gas resource, resulting in a reduction of our country's oil imports over time, the creation of thousands of high-paying jobs in the U.S. and in the payment of very significant local, state and federal taxes," CEO Aubrey McClendon said.
Officials said the
"As one of the world's largest independent oil and gas companies, CNOOC Limited is keeping a close watch on the development of the upstream sector across the world, among which is shale oil and natural gas development," Chairman Fu Chengyu said. "CNOOC Limited has the desire and ability to establish itself in this field in a suitable scale by cooperating with a leading company such as Chesapeake, which we believe will benefit both parties reflecting our win-win philosophy.
"Partnering with Chesapeake on this project to develop shale oil and natural gas jointly not only satisfies the spirit of Sino-U.S. cooperation in the energy sector, but also underscores CNOOC Limited's responsible approach to climate change issues and its social
CNOOC CEO Yang Hua said the cooperation deal with Chesapeake is consistent with the company's "value-driven overseas development strategy."
"The execution of this project will benefit CNOOC Limited's long-term production and reserves growth and should produce considerable returns for our shareholders," Hua said. "Chesapeake, as the world's leading company in the shale oil and natural gas field, has accumulated abundant experience on drilling and completion in various U.S. shale plays with world-class partners.
"We are therefore very confident about this project's potential success."
McClendon said the CNOOC deal fits within Chesapeake's plan to increase shareholder value.
"Chesapeake has continued to maintain a majority position in each of the five major projects subject to development arrangements ranging from 67 percent to 80 percent," he said. "The implied predevelopment value of Chesapeake's retained interest in those shale ventures is approximately $37 billion based on the valuations in the sale transactions."