Chesapeake Energy Corp. is going back to the Far East for help in funding its operations.
Chesapeake on Sunday announced a $1.2 billion joint venture agreement with CNOOC International Ltd., a subsidiary of one of China's largest independent oil companies.
The deal is Chesapeake's sixth industry development agreement and its second with CNOOC. CNOOC paid $1.2 billion for a stake in Chesapeake's holdings in the Eagle Ford Shale in south Texas in a deal announced in October.
CNOOC International will pay $570 million for a third of Chesapeake's 800,000-acre leasehold in the Niobrara Shale in northeast Colorado and southeast Wyoming.
The company also agreed to pay two-thirds of Chesapeake's drilling and completions costs until it has contributed another $697 million, which Chesapeake expects to occur by the end of 2014.
The deal is expected to close before the end of the first quarter.
“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,” Chesapeake CEO Aubrey K. McClendon said.
Chesapeake will be the operator of the joint venture with CNOOC. The company will conduct all leasing, drilling, completion, operation and marketing activities for the project.