| Company gets $3.4 billion for gas assets
Chesapeake sells part of Appalachian field to Norwegian company
By George Hohmann
Daily Mail Business Editor
dailymail.com
CHARLESTON, W.Va. - Chesapeake Energy Corp. announced it is selling a 32.5 percent stake in its Marcellus Shale assets in Appalachia to Norwegian oil company Statoil-Hydro for $3.4 billion.
The Marcellus Shale is the deep natural gas field in West Virginia, western Pennsylvania and other nearby states that Chesapeake and other drillers have been seeking to exploit. Although Chesapeake has many other operations in West Virginia, the Marcellus Shale has been the focus of the company's growth here.
It was not immediately clear what impact, if any, the deal might have on employment. Chesapeake said in a prepared statement that the joint-venture deal with Statoil-Hydro still leaves it with a 67.5 percent working interest in the Marcellus Shale.
Chesapeake spokesman Scott Rotruck said today, "In the past when new technology came to other sectors - manufacturing, coal, agriculture - it led to a decrease in jobs, whereas new technology in the natural gas industry now is leading to an increase in jobs because the new technology is opening up unconventional formations like the Marcellus Shale.
"Statoil-Hydro is a world-class company and it's wonderful to be in a partnership with them in the Marcellus Shale," he said.
The assets involved in the deal include about 1.8 million acres of leasehold, of which Statoil-Hydro will own about 600,000 acres and Chesapeake will own about 1.2 million acres.
Statoil-Hydro will pay $1.25 billion in cash when the deal closes and will pay an additional $2.1 billion from 2009 to 2012 by funding 75 percent of Chesapeake's 67.5 percent share of drilling and completion expenditures until the $2.1 billion obligation has been funded.
Chesapeake said it plans to continue acquiring leaseholds in the Marcellus Shale and Statoil-Hydro will have the right to a 32.5 percent participation in any such additions.
The Wall Street Journal said the deal helps shore up Chesapeake's "battered finances" and "highlights the growing international interest in the North American natural-gas market despite falling prices."
Chesapeake started with 10 employees in 1989. The Oklahoma City-based company entered the Appalachian Basin in 2005 when it bought Columbia Natural Resources.
The $3.4 billion it will receive in the joint venture deal with Statoil-Hydro is more than the $2.2 billion it paid for the entire Columbia Natural Resources franchise.
The company has 612 employees in Appalachia, including 436 in West Virginia, said company spokeswoman Maribeth Anderson. Most of its West Virginia employees - 256 - work out of Charleston.
Matt Sheppard, a Chesapeake spokesman, said on Monday - before the joint venture with Statoil-Hydro was announced - that Chesapeake currently has two drilling rigs running in the Marcellus Shale in West Virginia and one rig running in the Marcellus Shale in Pennsylvania. He said the company "fully expects to have up to 15 rigs running across the Marcellus Shale by the end of 2009."
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