Analyst Says Sale by Chesapeake Of Shale Assets 'a Natural Evolution'

by Joanna Kauffmann  on Monday, Feb. 14, 2011 12:00 am  

The timing, according to McGill, is also pretty much on track.

"Usually this kind of thing happens in the three- to five-year time frame once a play gets started, and that's kind of where a lot of shale plays are right now. We're seeing a lot of this turning of acreage. What we're seeing today is really a natural evolution. I would call it almost typical of a resource development. It's not that particularly different than things I've seen for 30 years."


Who Will Buy?

Chesapeake, the second-largest player in the Fayetteville Shale, gave no clue as to who might buy the assets it has on the block, which include about 415 million cubic feet of natural gas equivalent production per day and about 487,000 net acres of leasehold. Chesapeake is also selling its 25.8 percent interest in Frac Tech Holdings LLC of Cisco, Texas, and its 20 percent interest in Chaparral Energy of Oklahoma City, which operates a handful of wells in Crawford, Johnson and Logan counties.

Jim Gipson, director of media relations for Chesapeake, said that it would still be a few weeks before the company could talk definitively about potential buyers and what the sale of the assets could mean for Chesapeake's employees in Arkansas.

Both McGill and Deck believe that Exxon Mobil Corp. could be a possibility. Last year, Exxon Mobil bought XTO Energy Inc. of Fort Worth, Texas, which was the third-largest player in the Fayetteville Shale. Then in December, XTO Energy announced that it would buy $575 million in Fayetteville Shale assets from Petrohawk Energy Corp. of Houston, the fourth-largest gas producer in Arkansas.

McGill said that though Exxon stayed out of the initial "shale frenzy," it is now positioned to benefit from its decision to wait. Companies that get involved in shale play often experiment with technology at the beginning of shale exploration. A company as big as Exxon, however, can "come in and just buy" other companies and benefit from the technology that's already been established.

"Whether Exxon has a strategy to come in and build a bigger corporate presence in the Fayetteville Shale ... I have no idea," McGill said. "But they certainly have the wherewithal and the financial wherewithal to move into this play as a purchaser of acreage and resources, not necessarily as an initial developer of them."

Deck said it was still too early to tell whether the sale of Chesapeake's assets would prove to be good or "catastrophic" for the Fayetteville Shale. "It depends on the strategic direction of the purchasers. It depends on the price at which these assets are sold, and on wherever the purchasers are in their plan."

In an e-mail to Arkansas Business, Gipson said that the sale was expected to be completed in the "first half of 2011."



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