This excerpt taken from the STO 6-K filed Nov 12, 2008.
StatoilHydro forms strategic alliance with major US gas player
StatoilHydro (NYSE: STO, OSE: STL), the second largest natural gas supplier to Europe and Chesapeake Energy Corporation (NYSE: CHK), the largest US natural gas producer, today announced the signature of a strategic agreement to jointly explore unconventional gas opportunities worldwide.
Under these agreements StatoilHydro will initially acquire a 32.5% interest in Chesapeake’s Marcellus shale gas acreage covering 1.8 million net acres (7,300 square kilometres) in the Appalachia region of the northeastern USA. StatoilHydro’s share equals approximately 0.6 million net acres (2,400 square kilometres) of this leasehold.
StatoilHydro will pay a consideration of USD 1,250 million in cash and a further USD 2,125 million in the form of a 75% carry on drilling and completion of wells during the period 2009 to 2012. In order to earn this carry, Chesapeake is required to maintain a significant level of drilling activity.
The agreement will cover more than 32,000 leases in the states of Pennsylvania, West Virginia, New York and Ohio. Chesapeake plans to continue acquiring leases in the Marcellus shale play. StatoilHydro has the right to a 32.5% participation in any such additional leasehold.
With this transaction StatoilHydro has acquired future, recoverable equity resources in the order of 2.5-3.0 billion barrels of oil equivalent (boe). StatoilHydro’s equity production from the Marcellus shale gas play is expected to increase to at least 50,000 boepd in 2012 and at least 200,000 boepd after 2020. .
In the leaseholdings StatoilHydro will have the same 87% net revenue interest as Chesapeake. StatoilHydro expects a net positive cash flow from 2013.
Helge Lund, President and CEO of StatoilHydro, stated that:
Mr Lund added:
Chesapeake’s Chief Executive Officer, Aubrey K. McClendon, said:
Both companies believe that the development programme could support the drilling of 13,500 to 17,000 horizontal wells over the next 20 years with a continuous programme using up to 50 drilling rigs. The expected cost for each well is estimated at approximately USD 3.5 million with an ultimate recovery of approximately 560,000 boe per well.
The transaction is expected to close by year end.
There will be a press conference today at 10:00 am CET in StatoilHydro’s offices at Vækerø in Oslo. In addition there will be a conference call with EVP Peter Mellbye and CFO Eldar Sætre at 14:00 CET (08:00 EST). For participation in the conference call please call:
+44 (0)20 7806 1955 International
0800 028 1277 UK Freephone
1888 935 4577 US Freephone
Confirmation code: 5721494
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.