Birmingham, AL-based Energen Resources Corp. signed a farmout agreement with Chesapeake Energy Corp. Monday, setting aside a 50% stake in its 200,000-acre lease position in various shale plays in Alabama for $75 million in cash and a carried drilling interest.

The two companies also signed an agreement to form an area of mutual interest (AMI) to focus on the further exploration and development of these shale plays throughout Alabama.

Chesapeake CEO Aubrey K. McClendon said his company was “fortunate to be able to partner with [Energen] in their home state of Alabama, an area in which they have an extensive history and significant competitive advantages.

“Chesapeake’s presence in Alabama accomplishes our goal of building a significant leasehold position in every major shale play east of the Rockies,” McClendon said. “We now own approximately 4.25 million net acres of prospective shale leasehold onshore in the U.S…We believe this is the largest shale leasehold position in the industry and also believe these unconventional shale acreage positions will provide Chesapeake with unique competitive advantages for years to come and will expose our shareholders to unproved reserves that dwarf the company’s existing 8 Tcfe of proved natural gas reserves.”

Chesapeake also agreed to pay for Energen’s first $15 million of future drilling costs. For at least the next 10 years, the two energy companies will partner on a 50-50 basis on new leases, development and operations in the AMI. The purchase is subject to post-closing and other adjustments.

“Chesapeake is widely recognized as a leader in developing unconventional natural gas plays and has significant experience in the high-profile Barnett, Woodford and Fayetteville shales in Texas, Oklahoma and Arkansas as well as several others in the United States,” said Energen President James T. McManus.

He said Energen Resources, which is an affiliate of Alabama utility Alagasco, is the largest producer of onshore gas in Alabama and has extensive experience in coalbed methane and other tight formations. The company currently has about 1.7 Tcfe of proved reserves in the San Juan, Permian and Black Warrior basins and in the North Louisiana/East Texas area. “Together, Energen Resources and Chesapeake are well equipped to maximize the development potential of natural gas from a variety of shales in Alabama,” said McManus.

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