Monday, February 25, 2013

Chesapeake To Sell 50% Stake In Oklahoma Assets To China's Sinopec

AP is reporting:
Chesapeake Energy said on Monday that it will sell a 50 percent stake in oil and natural gas-rich land in Oklahoma to Chinese oil company Sinopec for $1.02 billion as the natural gas producer continues selling off assets to repay debt.
Chesapeake is the second-largest producer of natural gas in the U.S. after Exxon Mobil. Hurt by low natural gas prices, it has sold off billions in assets to pay off debt incurred as it rushed to buy land and other assets. It's also increasingly focused on more lucrative oil and gas liquids.
From Yahoo!In-Play:
Co and Sinopec International Petroleum Exploration and Production announced the execution of an agreement which provides for Sinopec to 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.
The total consideration for the transaction will be $1.02 billion in cash, of which ~ 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 ~ 34 thousand barrels of oil equivalent per day in the 2012 fourth quarter and, as of Dec 31, 2012, there was ~ 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.
$1.02 billion (almost all in cash) / 425,000 acres ---> $2,400/acre. 

SandRidge: 1.8 million net acres (per Filloon) x $2,400 ---> $4.32 billion. Market cap for Sandridge is $2.71 billion today.

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read at this site.


  1. I saw tonight in an article Chesapeake is selling all of it's 427,000 Bakken acres. Do you know anything about this?

    1. Until you mentioned it, I had not heard, but here's a link: