Chesapeake Energy Corp.’s new partner in developing the Utica shale in eastern Ohio won’t be identified until the deal closes in mid-December.
That was confirmed on Friday by Chief Executive Aubrey K. McClendon in a teleconference.
The Oklahoma-based energy giant had announced late Thursday a joint venture to develop the Utica shale with an “undisclosed major energy company.”
It was one of two new agreements that together will provide Chesapeake with $3.4 billion.
The energy company will acquire a 25 percent interest on 650,000 acres in 10 Ohio counties. That includes about 570,000 acres leased by Chesapeake and 80,000 acres owned by Texas-based EnerVest Ltd.
The price will be $15,000 an acre or about $2.14 billion to Chesapeake and about $300 million to EnerVest.
The area is expected to produce oil, ethane, butane and propane, highly desirable and valuable commodities.
The deal means that Chesapeake will, in effect, lose 142,500 acres of the 1.5 million acres it has leased in Ohio, but the joint venture will enable Chesapeake to recoup the $2 billion it has paid for Ohio leases, McClendon said.
Chesapeake will get $640 million in cash at closing and about $1.5 billion will be paid in drilling and completion costs, which Chesapeake expects to get by Dec. 31, 2014.
Chesapeake will be the operator of the joint venture and will handle all leading, drilling, completion, operations and marketing.
The energy company will be able to acquire 25 percent of any additional acreage obtained by Chesapeake in the 10 counties and the option to participate with Chesapeake in infrastructure related to production from the Utica shale assets.
McClendon said the joint venture will be the seventh developed by his company since 2008.
Chesapeake also announced the formation of a subsidiary, CHK Utica LLC, and the sale of $500 million of perpetual preferred shares to EIG Global Energy Partners of Washington, D.C.
Chesapeake said it intends to sell another $750 million of shares in CHK Utica to other investors.
CHK Utica owns leases on about 700,000 acres in 13 counties in Ohio and western Pennsylvania.
Under the agreement, Chesapeake will drill a minimum of 50 wells a year through 2016 for CHK Utica.
The $500 million investment means that Chesapeake’s drilling program in Ohio is “almost entirely funded for the foreseeable future,” Mc- Clendon said.
He called the Utica shale the “biggest thing to hit Ohio since the plow.”
Chesapeake is not releasing any new well data in Ohio because its initial reports of lucrative results from four wells drove up the price of acquiring leases, he said.
On Thursday, Chesapeake reported 2011 third-quarter earnings of $879 million, or $1.23 a share, up 58 percent from $558 million or 75 cents a share a year earlier.
McClendon said the company’s natural gas earnings will be flat for the next four years, but the company will grow through liquids, including oil.
Bob Downing can be reached at 330-996-3745 or bdowning@thebeaconjournal.com.
