Wednesday, September 12, 2012

The CHK - Shell/CVX Deal For the Permian

This is a "cut and paste" from another posting, so that it is not lost among the other stories.

This will be the focal post for this deal as it plays out.

From Yahoo! In Play
Chesapeake Energy to sell permian, midstream and certain other assets for net proceeds of ~$6.9 bln; Chevron and Royal Dutch Shell buyers in deal; co will repay $4 bln in loans during Q4: Co announced it has entered into multiple agreements to sell the vast majority of its Permian properties, substantially all of its midstream assets and certain noncore leasehold for total net cash proceeds of ~$6.9 bln. The company will use a portion of the proceeds from these asset sales to fully repay its $4.0 bln of term loans during the 2012 fourth quarter. Chesapeake has entered into purchase and sale agreements with three companies covering the vast majority of its Permian Basin assets for total net proceeds of ~$3.3 bln. The Permian Basin assets being sold produced ~21,000 barrels of liquids and 90 mln cubic feet of natural gas per day during the 2012 second quarter, or ~5.7% of Chesapeake's production during the quarter. Chesapeake has entered into a purchase and sale agreement to sell its assets in the southern Delaware Basin portion of the Permian Basin to SWEPI, a subsidiary of Royal Dutch Shell. Additionally, Chesapeake has entered into a purchase and sale agreement to sell its assets in the northern Delaware Basin portion of the Permian Basin to Chevron U.S.A. Inc., a subsidiary of Chevron Corporation. Following these transactions, Chesapeake will continue to own ~1.3 mln net acres of leasehold in the Utica Shale, in which its cost basis, net of various sales and its joint venture with Total, will be ~$200 per net acre (including all drilling carries in the Total joint venture).

Royal Dutch Shell confirms it acquired acreage in Texas from Chesapeake Energy (CHK) for $1.935 bln. 
It looks like all Permian assets, not Eagle Ford (see below: undisclosed amount of Utica acreage).

This is the Bloomberg link and data points:
  • Chevron, Shell, and EnerVest: will buy Permian Basin acreage for $3.3 billion (CVX has at least $20 billion in cash as reported elsewhere)
  • "The Permian Basin holdings were the most-valuable of several assets...[that were] put up for sale this year to raise cash, avoid a credit-rating downgrade, ...
  • Global Infrastructure Partners will pay $2.7 billion for most of Chesapeake's pipeline and processing operations
  • two unnamed companies will buy additional oil-gathering pipelines in the Eagle Ford for $300 million
  • Chesapeake is also selling Utica shale acreage to an undisclosed buyer for $600 million 
WSJ also reports same story.

Another WSJ story on this deal; hints abound that one might see Shell in the Bakken before this is all over.
Shell, one of the European oil firms to have most heavily invested in U.S. shale gas, said in February that it plans to produce about a quarter of a million barrels of oil equivalent from oil-rich shale by 2017. 
Analysts said the Wednesday's deal, an unexpected addition to Shell's previously flagged capital spending, appeared to be an opportunistic response to Chesapeake's asset sale
The deal showed "the check book is out," said Investec's Stuart Joyner. "It's probably part of a growing acquisition trend that will cap the dividend," he added. [RDS is listed both as RDS-A and RDS-B, each with its own market cap, so I'm not sure what the real market cap is for RDS, but I assume it's around $225 billion, almost identical to that of CVX, but I could be way wrong.]
MarketWatch link.

MDW comments


  1. Way off topic - For Your Eyes Only.

    anon 1

    1. Thank you for the link. My father-in-law was a veteran of three "wars": WWII, Korean War, and Vietnam War.

      He was part of the Americal Division in WWII and/or the Vietnam War (long story). He passed away some years ago; my biggest regret was not putting together his military history while he was alive. I will be going through his wooden padlocked boxes this next year.

  2. You might check with a Senator. There is a file on him and files on the units. They might send a copy.

    Anon 1

    1. Thank you. My hunch is once I go through those four boxes I will be able to put together a pretty good history; he was very meticulous about keeping memorabilia and records.