Summary
Chesapeake Energy Corporation (CHK) filed an 8-K on December 27, 2004, announcing two significant strategic moves. Firstly, the company has agreed to acquire privately-held BRG Petroleum Corporation and its related partnerships for $325 million in cash. This acquisition is expected to add approximately 223 billion cubic feet of natural gas equivalent (bcfe) of proved reserves and 30 million cubic feet of natural gas equivalent production (mmcfe) per day, primarily located in the Mid-Continent and Ark-La-Tex regions. Chesapeake sees significant undeveloped drilling potential in this transaction. Secondly, Chesapeake announced the closing of its acquisition of certain properties from Hallwood Energy Corporation for $292 million on December 15, 2004. This earlier acquisition added an estimated 135 bcfe of proved reserves and approximately 25 mcfe per day of net production from Barnett Shale properties in Texas, which CHK is actively developing. The company is financing these acquisitions through cash on hand and its credit facility, and is in the process of expanding and extending its credit facility to support these growth initiatives.
Key Highlights
- 1Chesapeake Energy to acquire BRG Petroleum and related partnerships for $325 million cash.
- 2BRG acquisition expected to add ~223 bcfe of proved reserves and ~30 mmcfe/day of production.
- 3BRG properties are concentrated in the Mid-Continent and Ark-La-Tex regions with identified undeveloped drilling locations.
- 4Chesapeake closed a $292 million acquisition of Barnett Shale properties from Hallwood Energy on December 15, 2004.
- 5Hallwood acquisition added ~135 bcfe of proved reserves and ~25 mcfe/day of production.
- 6BRG acquisition is subject to customary closing conditions and expected to close February 1, 2005.
- 7Chesapeake is financing acquisitions via cash and credit facility, and seeking to expand its credit facility to $1 billion.