Saturday, March 2, 2013

Chesapeake To Sell Its Bakken Acreage -- Unconfirmed

Updates

April 15, 2013: there is still no confirmation that CHK has sold its Bakken acreage. This PN article from October 7, 2012, provides a bit more data, but still no confirmation. It will be interesting to listen to the 1Q13 earnings conference call which might be April 29, 2013. 
Several calls and emails over the last few weeks to Chesapeake’s media relations folks about the status of the company’s Williston Basin, yielded a single response: “We are not operating any drilling rigs in the Bakken.”
What we do know is this: Although the company has been aggressively selling assets elsewhere, there has been no announcement about it putting its Williston Basin 400,000 to 500,000 net acres up for sale. (The numbers come from 2012 presentations made by Aubrey K. McClendon, Chesapeake’s chief executive officer.)  
March 6, 2013: with no confirmation of the story that ran March 1, 2013, one starts to wonder about its veracity. However, this Bloomberg story might a) put it in perspective; and, b) explain what might be going on. 

March 4, 2013: the original story was posted late Friday night, March 1, 2013. Three days later no news anywhere in "mainstream media." In addition there are no comments at PowerPlay which, at least to me, calls all this into question.  It almost sounds like someone overheard some discussion somewhere suggesting a deal was done but in fact it was just that: a discussion. Time will tell. It's such a big story, I would think the original source would post an update, even to say "no news."

Original Post

Link here to Jay F. Marks/PowerPlay, getting information from Upstream.com.

Jay is reporting that CHK is selling its entire 427,000-acre Bakken prospect. If the report is accurate, my hunch is that we will be seeing Sinopec in North Dakota. Wow, with Chinese ceramics, it all fits, doesn't it?

SeekingAlpha mentioned Chesapeake and the Bakken in January, 2013, but no mention of possible sale. 

The story is not yet verified, but it would not be a bit surprising for CHK to sell its Bakken assets.

From MarketWatch, February 25, 2013:
Nonetheless, it (the Mississippi Lime/Sinopec deal) could prove a tough act to follow. The remaining $3 billion to $6 billion in Chesapeake’s asset sale program will have to be raised from the sale of mostly undeveloped acreage, analysts at UBS said in a note to clients Monday. 
Petroleum News had a nice report on this subject back in October, 2012.

Back-of-the-envelope calculations: 427,000 acres x $5,000/acre = $2 billion. Would Sinopec or anyone buy Bakken acreage outside the core area for a premium ($10,000/acre would net $4 billion)?

5 comments:

  1. Most of the wells CHK drilled were a complete bust. How much time is left on their leases?
    How about 427,000 acres x $5.00 = $2 million.
    Most of the value in their holdings would be in the equipment you would salvage before plugging the holes they are leaving behind.
    I have heard mineral owners in NW SD talk about the pugh(sp) clause. If there is another formation that has potential, do they have leases for that? And if so they probably do not have much time to identify what will work to exploit that formation, then get it held by production.
    427,000 acres divide by 1280 = 333 wells drilled in pretty short order if they have 5 year leases.

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  2. CHK said the WB land was for sale in Feb. A little may be worth a lot, and a lot worth a little.

    CHK is offering their Northern Eagle Ford, which has big production. Far more valuable. Maybe the analyst wasn't listening.

    Sinopec doesn't buy to operate onshore in the US. Chinese won't buy WB to operate.

    MS was originally marketed exclusively to Asians. US government didn't approve.... until after the election. CHK marketed to US companies, but gov't finally approved Sinopec.

    CNOOC is in JV in Eagle Ford and Niobrara, but seems to be selling when CHK sells. No indication that they will buy what CHK sells.

    anon 1

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    1. I haven't checked yet today, but it's interesting, it's been a good 48 hours since the original story, and there has been no confirmation in mainstream media regarding this story.

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  3. i do know some of the leases where chk drilled expire this month on a the three year lease but do have the option to renew one year at a time with a total of five years.

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    1. Your comment made me think of a new poll. Thank you. Hopefully I will have the poll up later. Getting ready to watch "Columbo."

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