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ExxonMobil Exits Barnett Shale

A deal announced last week marks the exit of ExxonMobil Corp. from the prolific Barnett Shale gas play and the further accumulation of Barnett assets by Chesapeake Energy Corp., which has become a leading North American gas shale player.

ExxonMobil's exit from North America's most touted gas breadbasket comes amid softening gas prices that are projected to hang on for a while. Last week Stephen Smith Energy Associates tweaked its gas 2008 price forecast downward, projecting a $9.30/MMBtu average Henry Hub price, down from a previous estimate of $9.47/MMBtu. Also lowered were the firm's projections for 2009 and 2010 (see related story).

Dallas-based Harding Energy Partners LLC acquired all core Barnett assets, including those of ExxonMobil, that were held by DDJET Ltd. LLP and sold them to Chesapeake, Harding said last Tues. ExxonMobil subsidiary Metroplex Barnett Shale LLC was the operator for DDJET, the Exxon-Harding partnership that was established in late 2006 for development of gas production in Tarrant, Johnson, Ellis, Dallas, Denton, Navarro, Collin and Hill counties in Texas (see NGI, Dec. 25, 2006).

ExxonMobil quietly entered the Barnett in late 2005 through a joint venture with privately held Harding. The companies in 2005 agreed to explore the Mansfield-Grand Prairie area in the southern Tarrant and northern Johnson counties. Harding then had about 25 Barnett wells in Johnson, Parker and Wise counties that were producing an average of 24.5 MMcf/d. Harding also has oil and gas operations in North Texas.

Operations have been transferred to Chesapeake at the Railroad Commission of Texas. Chesapeake has contracted with Harding for a transition agreement to ensure the orderly handover of operations and a land services agreement for leasing and other services in the area. Continuing to lead the leasing activity is Petrocasa Energy Inc. Also sold to Chesapeake is an 80-mile gas pipeline.

An ExxonMobil spokesman confirmed the deal and that it represents all of the company's Barnett assets and said, "ExxonMobil has a long-standing practice of continually reviewing all assets for their contribution to the company's operating needs and financial objectives, as well as their potential value to others. Our objective is to maintain a consistent focus on being an industry leader in asset performance, business efficiency and in maximizing shareholder value."

Harding said it made the decision to sell the Barnett assets in order to develop more fully its 146,000 net acres in the James-Limestone and 65,000 net acres in the Haynesville Shale, both in East Texas. The company is also exploring the 50,000 acres it controls in southeast Mississippi as well as a "significant" lease position in West Texas. The partners in Harding, who combined have more than 250 years of experience in the energy industry, have led leasing, permitting, exploration, midstream and gas marketing activities in the Barnett Shale as well as in basins in East and West Texas, Mississippi and other locations across the country, the company said.

Assets acquired by Chesapeake and the purchase price were not disclosed. The deal included the first permit, obtained in 2007, awarded to drill for gas within Dallas city limits, Bloomberg reported. DDJET never drilled the well at the site near Dallas Baptist University.

Last fall Chesapeake began production from the first of 11 wells on its 18,000-acre Dallas/Fort Worth International Airport Lease (see NGI, Nov. 5, 2007). In spring 2007 Chesapeake surpassed ExxonMobil to become the sixth largest U.S. onshore gas producer (see NGI, May 7, 2007).

Less than a month ago Williams completed the purchase of interests in the Barnett Shale for $147 million from privately held Aspect Abundant Shale LP and other parties (see NGI, Sept 15).

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