Chesapeake Energy: Still Raising Cash (BP, CHK, STO, PXP)

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If BP plc (NYSE:BP) plans to buy Chesapeake Energy (NYSE:CHK) as the rumor mill has suggested, it had better hurry up while there’s still something left. Early this morning, Chesapeake announced that it had sold a 32.5% interest in its Appalachian Marcellus Shale assets to StatoilHydro (NYSE:STO), Norway’s state oil company. Chesapeake banked $3.375 billion in exchange for about 600,000 net acres.

The deal is similar to the oneChesapeake made with BP for BP’s 25% stake in Chesapeake’s FayettevilleShale assets. StatoilHydro pays $1.25 billion in cash at closing andagrees to fund 75% of Chesapeake’s cost of drilling its remainingassets up to a total of another $1.25 billion. The rest of the salesprice gives StatoilHydro the rights to 32.5% participation in any newleases Chesapeake acquires. The transaction is expected to close by theend of 2008. Chesapeake also sold a working interest in its HaynesvilleShale assets to Plains Exploration (NYSE:PXP) earlier this year.

Chesapeake’s CEO commented, "These joint ventures clearly demonstratethe enormous value of Chesapeake’s shale natural gas assets and theunique capability of our organization to develop them." Right.Developing assets by selling them. That’s a good one.

Paul Ausick
November 11, 2008