BHP Buys Fayetteville Shale Assets

Global mining giant BHP Billiton has made its first move into shale gas, agreed to agreeing to buy shale gas interests from Chesapeake Energy Corp.

In BHP's first big acquisition since a string of failed deals, the global miner said it was buying Chesapeake's holdings in Arkansas' Fayetteville shale natural gas field for $4.75 billion.

We're delighted to inform you today of a very, very substantive piece of business that we feel is a huge and very, very positive addition to our petroleum company within BHP Billiton Corporation," BHP Petroleum chief Michael Yeager told reporters, adding the deal would be cash and earnings accretive from day one.

BHP said it aimed to triple daily production from the new asset as the field was developed.

Chesapeake's Fayetteville shale assets include about 487,000 acres of leasehold and producing natural gas properties in Arkansas in the U.S., one of the world's largest gas fields.

Chesapeake said the deal with BHP Billiton Petroleum included existing net production of about 415 million cubic feet of natural gas equivalent per day and midstream assets with about 420 miles of pipeline.

Yeager said, "this transaction marks BHP Billiton's entry into the US shale gas business. The operated position we are obtaining will immediately make BHP Billiton a major North American shale gas producer."

"The acquisition is consistent with BHP Billiton's strategy of investing in large, long-life, low cost assets with significant volume growth from future development," the company said. "It also supports our goal of diversification by geography, customer and product. BHP Billiton will become the operator of Chesapeake's operated interests in the field," he continued.

BHP's acquisitions strategy has shifted focus to its petroleum division after regulatory and political obstacles dashed its $39 billion takeover bid for fertilizer maker Potash Corp and an iron ore joint venture with Rio Tinto.

The transaction is expected to close in the first half of this year, Chesapeake said.

Source: Natural Gas for America