A French company now has a stake in Ohio's oil-rich Utica shale, teaming with Chesapeake Energy and Houston-based EnerVest in a joint venture involving some 619,000 liquid-rich acres in all or part of 10 counties in Eastern Ohio.
Details of the $2.32 billion deal, announced today, identify Total E&P USA Inc., a wholly-owned subsidiary of France's Total SA, as the previously unnamed third party in a joint venture first revealed by Chesapeake in November.
Chesapeake and a third partner, EnerVest, contributed their lease holdings roughly 542,000 Utica acres from Chesapeake and another 77,000 that had been held by EnerVest.
In return, Chesapeake will get roughly $2.03 billion around $610 million at closing, with the remaining $1.42 billion paid in the form of a drilling and completion cost-carry that Chesapeake said it anticipates "fully receiving by year-end 2014."
EnerVest's cash share is about $290 million.
Chesapeake will serve as the operator of the joint venture and will conduct all leasing, drilling, completing, operating and marketing activities for the project.
Total also will participate with Chesapeake and EnerVest in midstream infrastructure related to production generated from the assets with a 25 percent interest, Chesapeake said in a release announcing the deal, and also will acquire a 25 percent share in all additional acreage acquired by Chesapeake in the joint venture area.
Chesapeake had partnered with Total previously in a $2.25 billion joint venture in the Barnett shale in North Texas in 2010, and Chief Executive Officer Aubrey K. McClendon said they were "pleased to extend our existing relationship with Total as a (joint venture) partner in the Barnett shale to now include the Utica shale."
"We believe that the Utica shale is a world-class asset with world-class returns and now we have a world-class partner to help develop the play more aggressively than we could have with our own resources," McClendon said in a release announcing the deal. "This Utica transaction is our seventh significant (joint venture) and in these seven (joint ventures), Chesapeake has sold approximately 1.5 million net acres for total leasehold consideration of 14.8 billion while retaining 3.6 million net acres as of the (joint venture) date with an indicated value by the (joint venture) partners of $45.7 billion."
Yves-Louis Darricarrere, president of Total Exploration & Production, said the French company is "delighted to be building on our technical successes with Chesapeake in the Barnett shale (joint venture) and to expand into the liquid-rich Utica shale play in Ohio."
"This is consistent with our strategy to develop positions in unconventional plays with large potential and, in this case, with value predominantly linked to oil price," Darricarrere said, adding the joint venture "will provide us with a material position in a valuable long-term resource base under attractive terms and with a top-class operator."
"Total is conscious of the environmental aspects linked to developing shale acreage and is confident in Chesapeake's capacity to manage the Utica shale operations in a responsible manner, utilizing the highest industry standards in this respect."
Darricarrere said in his statement that 13 wells had been drilled to date across the acreage 'with very promising results seen from each well in terms of productivity and liquid content." The joint venture plans to ramp up drilling activities over the next three years with 25 rigs to be mobilized by 2014 to fully appraise and develop the acreage, Total's release said.
SEC production in Total's share is expected to reach 100,000 barrels of oil equivalent per day by the end of the decade.
Total also pointed out Chesapeake and EnerVest agreed to jointly develop "the necessary midstream facilities to export the production from this acreage."
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