BHP to Buy Chesapeake Shale Gas Assets for $4.75 Billion

BHP Billiton said on Monday afternoon that it would buy Chesapeake Energy’s shale-based natural gas assets in northern Arkansas for $4.75 billion.
The deal is the first by the Anglo-Australian giant following its failed effort to buy the Potash Corporation of Saskatchewan last year. The company previously stumbled in its efforts to acquire Rio Tinto, and then form a joint venture with its rival in recent years.
Yet despite criticism from some shareholders about stumbles in the company’s deal-making strategy, BHP’s management has insisted that the mining giant will continue to look to acquisitions for growth.
BHP’s chief executive, Marius Kloppers, has indicated that he would be especially interested in expanding the company’s oil and gas businesses, which would not face the same level of regulatory scrutiny that deals in its core iron-ore business would.
Such deals would supplement BHP’s plan to invest $80 billion in its own mining projects. To further placate its shareholders, the company has begun a $10 billion share buyback program. (The company said separately that it planned to begin buying back about $5 billion worth of shares traded on the Australian stock market, as part of its overall share buyback program.)
Buying Chesapeake’s assets in the Fayetteville Shale regions, one of the most biggest sources of natural gas in the country, will help BHP quickly enter the American shale gas market. The Chesapeake assets include about 487,000 acres and will bolster BHP’s net reserve and resource base by 45 percent, BHP said.
The assets produce more than 400 million cubic feet of gas per day.
“The Fayetteville Shale is a world-class onshore natural gas resource,” J. Michael Yeager, the chief executive of BHP’s petroleum business, said in a statement. “The operated position we are obtaining will immediately make BHP Billiton a major North American shale gas producer.”
BHP has indicated that it plans to increase its output of oil and natural gas by nearly 50 percent by the end of the decade.
Chesapeake disclosed this month that it would seek to sell off some of its properties to raise $5 billion, in an effort to trim its debt load.
Over the past several months, Chesapeake has sold off stakes in its holdings in Texas and Wyoming to Cnooc, the giant Chinese state-run oil company, for nearly $1.7 billion.
The deal is expected to close in the first half of this year.