Sinopec, Chesapeake Form JV

Transaction Type
Announce Date
Post Date
Estimated Price

Formation of JV to develop 850,000 net acres in Mississippi Lime play.

OKLAHOMA CITY-- Chesapeake Energy Corp. (NYSE:CHK) and Sinopec International Petroleum Exploration and Production Corp. on Feb. 25 announced the execution of an agreement in which Sinopec will purchase a 50% undivided interest in 850,000 of Chesapeake’s net oil and natural gas leasehold acres in the Mississippi Lime play in northern Oklahoma (425,000 acres net to Sinopec).

The total consideration for the transaction will be $1.02 billion in cash, of which about 93% will be received upon closing. Payment of the remaining proceeds will be subject to certain customary title contingencies.

Production from these assets (including Mississippi Lime and other formations), net to Chesapeake’s interest and prior to Sinopec’s purchase, averaged about 34,000 barrels of oil equivalent per day in the 2012 fourth quarter and, as of Dec. 31, 2012, there was approximately 140 million barrels of oil equivalent of net proved reserves associated with the assets.

All future exploration and development costs in the joint venture will be shared proportionately between the parties with no drilling carries involved. As the operator of the project, Chesapeake will conduct all leasing, drilling, completion, operations and marketing activities for the joint venture. The transaction is anticipated to be completed in the 2013 second quarter.

Steven C. Dixon, Chesapeake’s chief operating officer, said, “We are excited to announce the execution of our Mississippi Lime joint venture with Sinopec, which moves us further along in achieving our asset sales goals and secures an excellent partner to share the capital costs required to actively develop this very large, liquids-rich resource play.”

Jefferies acted as financial advisor to Chesapeake Energy in the joint venture. The transaction represents the 3rd JV Jefferies has advised on involving a Chinese national oil and gas company.