Chesapeake Energy Corp. on Monday took another step toward closing a multibillion dollar funding gap.
Chesapeake announced a $1.02 billion joint venture with Sinopec International Petroleum Exploration and Production Corp. for a stake in its acreage in northern Oklahoma's Mississippi Lime play.
Chesapeake will get the bulk of the money in cash when the deal closes.
Oppenheimer analyst Fadel Gheit said the deal is not structured like a typical joint venture, which usually includes less up-front cash and more money for future drilling costs, because of Chesapeake's budget woes.
“They need the cash today and not tomorrow,” Gheit said. “To them, obviously time is critical.”
Sinopec will buy an interest in half of Chesapeake's 850,000 net acres in the oil-rich Mississippi Lime, then share future exploration and development costs in the play.
“We are excited to announce the execution of our Mississippi Lime joint venture with Sinopec, which moves us further along in achieving our asset sales goals and secures an excellent partner to share the capital costs required to actively develop this very large, liquids-rich resource play,” said Steven C. Dixon, Chesapeake's chief operating officer.
Chesapeake's Mississippi Lime acreage produced an average of 34,000 barrels of oil equivalent a day during the fourth quarter. The acreage has proved reserves of 140 million barrels of oil equivalent.
Chesapeake's stock slipped nearly 7 percent Monday, dipping $1.39 to $19.11, a performance Gheit said may have been indicative of expectations the company would get more money for its Mississippi Lime acreage.