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Chesapeake rings up 4 more U.S. acquisitions for $686 million
Ray Tyson Petroleum News Houston Correspondent
It didn’t take long for Chesapeake Energy to hit the acquisition trail with $686.4 million in announced U.S. onshore property deals, bringing the Oklahoma-based exploration and production independent’s grand total to roughly $2.7 billion since early 2004.
From four private companies, Chesapeake said April 12 that it would be acquiring reserves totaling about 566 billion cubic feet of natural gas equivalent, consisting of 289 bcfe of proved reserves and 277 bcfe of probable and possible reserves.
Current daily net production from the properties located in South Texas, East Texas and the Permian basin was estimated at 61 million cubic feet of natural gas equivalent production from 405 existing wells. Chesapeake said it plans to invest an additional $683 million in future drilling and development.
“The acquisitions are heavily weighted to natural gas and the properties have attractive operating and future development costs,” said Aubrey McClendon, Chesapeake’s chief executive officer.
He said Chesapeake’s acquisition cost for the 289 bcfe of estimated proved reserves would be $1.49 per thousand cubic feet of natural gas equivalent. Based on the cost of the company’s projected development plan, he added, the estimated “all-in cost” of acquiring and developing the 566 bcfe of total reserves would be $2.42 per mcfe. Company has operations in areas The properties Chesapeake is acquiring also are located in areas where the company already has extensive drilling and producing operations. Moreover, the company said it has identified 276 proved undeveloped and 375 probable and possible drilling locations. With the new properties, Chesapeake’s proved reserve base would grow to 5.4 trillion cubic feet of natural gas equivalent, while the company’s unproven reserves would increase to more than 4 tcfe.
The sellers were Houston-based Laredo Energy II, LLC and its partners, Houston-based Pecos Production Co., Midland-based Rubicon Oil & Gas I, LP, and an unidentified Dallas-based independent oil and gas company.
“These acquisitions have all of the attributes of … previous Chesapeake transactions — acquisitions from private companies of low-cost, high-margin proved producing natural gas reserves, exploitation potential of proved undeveloped, probable and possible reserves and finally, exploration potential for new reserves,” McClendon said.
Chesapeake said it recently closed one of the transactions for about $228 million in cash and expects to close the remaining acquisitions by the end of May. The company said it intends to finance the deals through a combination of senior notes and preferred stock. More than $2B in acquisitions in 2004 In 2004 alone, Chesapeake announced or closed acquisitions totaling more than $2 billion, including $325 million in cash for independent BRG Petroleum, founded and chaired by James Burkhart, a member of Texas A&M’s famed “Junction Boys” football team coached by legendary college coach Paul “Bear” Bryant in the 1950s. BRG’s primary focus area was the U.S. Mid-continent, particularly in the Sahara region of Northwest Oklahoma.
Other transactions during 2004 included $277 million for Hallwood Energy properties in the prolific Barnett Shale field of East Texas, $590 million for South Texas and Mid-continent properties from three private companies; $425 million for independent Greystone Petroleum that included Greystone’s position in the giant Sligo Field in Louisiana, and $420 million for Mid-continent, Permian Basin, South Texas and onshore Gulf Coast properties from Concho Resources.
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