Sunday, August 26, 2012

Chesapeake, Devon: Foreign Buyers Hungry for Shale Plays

Chesapeake Energy (CHK) rose 4% in early trading after the company said it would sell about 25% of its stake in the Utica shale play in Eastern Ohio to French oil giant Total (TOT) for $2 billion (EnerVest will also receive $290 million for its stake in the Utica).

Separately, Devon Energy (DVN) said it will sell one-third of its interest in five shale plays to China’s Sinopec for $2.2 billion. Devon rose 6% in early trading.

Chesapeake is on a debt-cutting binge; the company said last year that it planned to reduce its debt by 25% over two years.

It’s not clear how bullish the transaction is for natural gas, however. Total seems to like it mostly because the shale also contains a lot of liquid, which is trading at a major premium to gas.

“Total is delighted to be building on our technical successes with Chesapeake in the Barnett Shale JV and to expand into the liquid-rich Utica Shale play in Ohio,” said Yves-Louis Darricarrere, Total Exploration & Production�s President, in a statement. “This is consistent with our strategy to develop positions in unconventional plays with large potential and, in this case, with value predominantly linked to oil price.”

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