Chesapeake Energy Corp., Oklahoma City, has purchased Houston-based, privately held Greystone Petroleum LLC for $425 million, giving it natural gas assets in the Ark-La-Tex region of northern Louisiana. Greystone is a portfolio company of private equity firm First Reserve Corp. Greystone's major asset is its 16,100-gross-acre contiguous leasehold position over the crest of the giant Sligo Field in Bossier Parish, La. Discovered in 1938, Sligo has produced 1.6 trillion cu. ft. equivalent of gas from the Rodessa, Pettit, Hosston and Cotton Valley formations at depths of 4,100 feet to 9,600 feet. Chesapeake will gain an estimated 214 billion cu. ft. of gas equivalent in proved reserves and 51 billion equivalent of probable and possible reserves, raising its total proved reserves to about 3.8 trillion equivalent. Greystone produces 45 million cu. ft. of gas equivalent per day, bringing Chesapeake's projected June production to more than 950 million per day. Chesapeake plans to increase production from the Greystone properties by about 50% to total between 65- and 70 million per day through a two- to four-rig drilling program during the next 12 to 18 months. After allocating about $65 million of the purchase price to unevaluated leasehold and midstream gas assets, Chesapeake's acquisition cost will be $1.68 per thousand cu. ft. of gas equivalent of proved reserves. Including anticipated future drilling costs for fully developing the proved, probable and possible reserves, the company estimates an all-in acquisition cost of $1.94 per thousand. The proved reserves have a reserves-to-production index of 13 years, are 98% gas, 93% operated, 55% proved developed and have current lease operating expenses of $0.39 per thousand equivalent. Greystone was advised by Simmons & Co. International and Griffis & Associates LLC. Chesapeake was advised by Randall & Dewey.
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