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Sinopec to buy Chesapeake Energy's Mississippi field for $1.02 billion

Staff writer |
China Petroleum & Chemical Corp (Sinopec) will buy 50% of Chesapeake Energy's Mississippi Lime oil and gas field for $1.02 billion.

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Chesapeake Energ will sell a 50% undivided interest in 850,000 of its net oil and natural gas leasehold acres in the Mississippi Lime play in northern Oklahoma (425,000 acres net to Sinopec). The price will be paid in cash, approximately 93% of the price will be received upon closing and payment of the remaining proceeds will be subject to certain customary title contingencies.

Chesapeake will be the operator, conducting all leasing, drilling, completion, operations and marketing activities for the joint venture. The transaction is anticipated to be completed in the second quarter of 2013.

"We are excited to announce the execution of our Mississippi Lime joint venture with Sinopec, which moves us further along in achieving our asset sales goals and secures an excellent partner to share the capital costs required to actively develop this very large, liquids-rich resource play," said Steven C. Dixon, Chesapeake's chief operating officer.

Production from these assets, including Mississippi Lime and other formations, net to Chesapeake's interest and prior to Sinopec's purchase, averaged approximately 34,000 barrels of oil equivalent per day in the fourth quarter of 2012 and, as of December 31, 2012, there was approximately 140 million barrels of oil equivalent of net proved reserves associated with the assets. All future exploration and development costs in the joint venture will be shared proportionately between the parties with no drilling carries involved.

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