Investors Favor Mining Giant BHP Billiton's Move into Fayetteville Shale

by Lance Turner  on Tuesday, Feb. 22, 2011 3:48 pm  

Chesapeake Energy Corp. of Oklahoma City has been the Fayetteville Shale Play's second-largest operator, just behind Southwestern Energy Corp. of Houston.

On Tuesday, Chesapeake announced it was selling that No. 2 position to a No. 1 operator -- BHP Billiton Limited of Melbourne, Australia -- that's looking to get even bigger.

BHP, whose origins can be traced to the 1860s, is the world's largest mining company and largest oil and gas company in Australia. It has about 40,000 employees working in 25 countries. In fiscal 2009, it reported more than $50 billion in revenue.

Last year, it ranked just two slots below Wal-Mart Stores Inc. of Bentonville on Forbes' "Global 2000" list of companies ranked by market value.

The sale gets BHP Chesapeake's interests in 487,000 net acres of leasehold and producing natural gas properties in the play. It also puts BHP in the U.S shale business for the first time, and the company isn't waiting to expand. Its chief executive, Micheal Yeager, said Monday that it plans to triple daily production, spending $800 million to $1 billion a year over 10 years to develop the field.

Standards & Poor's ratings on BHP's shares were unchanged on the news of the acquisition. In a research note, the firm said the move is "consistent with BHP Billiton's growth strategy and will improve the group's asset diversity and market position in the U.S. shale gas sector."

Another analyst, quoted by Reuters, said investors would view the deal in a favorable light following BHP's three recent, failed multi-billion takeover attempts, including a dropped plan to purchase the Potash Corporation of Saskatchewan.

"BHP have had (three) multi-billion deals which have tipped over, so the market should be pleased that this is one that is going to go through and it is a change of direction in terms of looking at their petroleum division," Ric Ronge, a portfolio manager at Pengana Capital, said, according to the news service.
In Sydney, BHP shares rose 3 percent on the news.


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