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StatoilHydro Grabs Marcellus Stake in $3.38B Chesapeake Deal

Norway's StatoilHydro ASA gained a stake in the Marcellus Shale after agreeing to partner with Chesapeake Energy Corp. in a $3.38 billion transaction. About $1.25 billion will be paid for 32.5% of Chesapeake's leasehold and $2.13 billion will be set aside to fund 75% of drilling and completion costs from 2009 to 2012.

The agreement ended speculation about which producer Chesapeake would deal with after announcing in August that it was looking for partners in some of its unconventional gas assets (see NGI, Aug. 18). BP plc, which this year has completed two similar transactions with the Oklahoma City-based producer, was rumored to be on the short list of prospective buyers (see NGI, Nov. 10).

Statoil's equity production from the Marcellus Shale should approach "at least 50,000 boe/d" in 2012, peaking to at least 200,000 boe/d after 2020, said Executive Vice President Peter Mellbye.

The two producers also agreed to explore for unconventional gas internationally, which would expand Chesapeake's options, which up to now have been focused on domestic onshore basins. In addition, Statoil gains access to Chesapeake's finesse in drilling unconventional wells, expertise that the European company may use overseas. The two companies could spend as much as $60 billion over the next 20 years to drill as many as 17,000 wells.

Chesapeake CEO Aubrey McClendon in the past has noted that he was not interested in the political risks involved with overseas exploration. However, as U.S. gas prices have fallen, the CEO has said he wants to find ways to tap the international gas markets, which might include liquefying some excess U.S. gas to transport overseas (see NGI, Aug. 4). And Statoil is a player in the LNG markets -- including in the United States.

"Jointly, we can export our world-class unconventional natural-gas technology for further long-term growth," McClendon said.

Statoil is one of the leading players in the deepwater Gulf of Mexico, and its U.S. gas portfolio has been steadily growing (see NGI, March 10; Sept. 11, 2006).

Earlier this year the Norwegian producer agreed to purchase 1 billion cubic meters of liquefied natural gas from the Cove Point, MD, receiving terminal from 2009 to 2014, and it secured all of the terminal's new capacity, which would amount to about 10 billion cubic meters of gas annually, beginning in 2009. In addition, Statoil last year paid $2.1 billion for an oilsands company in Canada.

On a per-acre basis, Statoil is paying Chesapeake around $5,800/acre net. By comparison, Mellbye noted that BP two months ago paid Chesapeake around $14,000/acre net for leaseholds in the Fayetteville and Woodford shales (see NGI, Sept. 8).

"BP paid an awful lot more for the rights they acquired," Statoil's Mellbye said. "But they bought in an area that's much more mature where you find much more experience, so the risk is less but so is the upside potential.."

Financial analysts had been concerned that Chesapeake was running out of options after going into debt to buy up unproven gas leaseholds across the United States. Most of the notes last week focused on the $1.25 billion that Statoil will provide Chesapeake up front.

"This was the deal people were scared couldn't get done and it did," said analyst Dan Pickering of Tudor, Pickering, Holt & Co.

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