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Oil & Gas

StatoilHydro forms strategic alliance with major US gas player

November 12, 2008
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StatoilHydro and Chesapeake Energy Corporation announced their agreement to jointly explore unconventional gas opportunities worldwide, according to the Associated Press. StatoilHydro will initially acquire a 32.5% interest in Chesapeake''s Marcellus shale gas acreage covering 1.8 million net acres in the Appalachia region of the northeastern United States. StatoilHydro''s share equals approximately 0.6 million net acres of this leasehold. StatoilHydro will pay $1,250 million in cash and a further $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. 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. Both companies believe that the development program could support the drilling of 13,500 to 17,000 horizontal wells over the next 20 years with a continuous program using up to 50 drilling rigs. The expected cost for each well is estimated at approximately $3.5 million with an ultimate recovery of approximately 560,000 boe per well. The transaction is expected to close by year end.

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