Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Chesapeake Keeps Cashing In

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

When my Foolish colleague David Lee Smith characterized one of BP's (NYSE: BP  ) recent acquisitions as following in Chesapeake Energy's (NYSE: CHK  ) footsteps, he couldn't have been more prescient.

Just weeks later, the two firms have inked yet another major agreement. This time, the international oil and gas major is picking up 25% of Chesapeake's Fayetteville Shale assets for $1.9 billion.

BP isn't the only company to jump on board this Arkansas shale sizzler in the past year. XTO Energy (NYSE: XTO  ) has been a big buyer, while Petrohawk (NYSE: HK  ) paid a pretty penny for some prospective acreage, too. BP's payment of around $14,000 an acre actually comes in right around Petrohawk's purchase price.

Before all the Haynesville hoopla, the Fayetteville was looking like the jewel in Chesapeake's crown. Despite its recent overshadowing, this is still a terrific asset. Chesapeake notes that initial production rates are on the rise, while drilling costs are declining. So why is Chesapeake selling?

This deal is part of the same asset monetization program that spurred the company to sell off the Woodford to BP, and to divest a 20% stake in the Haynesville to Plains Exploration & Production (NYSE: PXP  ) . Not only are the joint venture-style deals bringing in cash up front, but the new partners are footing all near-term development costs. This allows Chesapeake to maintain a furious pace of drilling without issuing more debt or equity.

Chesapeake is also actively negotiating a similar venture up in the Marcellus Shale. Any progress on that front with a company like ConocoPhillips (NYSE: COP  ) or ExxonMobil (NYSE: XOM  ) would reinforce the majors' apparent appetite for onshore natural gas assets. It should also reassure energy investors that such assets are getting more attractive to potential buyers as prices fall -- not less so.

Chesapeake Energy is an Inside Value selection. See what other deep values the team has unearthed with a free 30-day trial.

Fool contributor Toby Shute doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 718846, ~/Articles/ArticleHandler.aspx, 10/28/2016 8:14:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,161.19 -8.49 -0.05%
S&P 500 2,126.41 -6.63 -0.31%
NASD 5,190.10 -25.87 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/28/2016 4:01 PM
BP $35.68 Down -0.32 -0.89%
BP CAPS Rating: ****
CHK $5.79 Down -0.29 -4.77%
Chesapeake Energy CAPS Rating: ***
COP $44.97 Up +0.97 +2.20%
ConocoPhillips CAPS Rating: ****
HK.DL2 $0.00 Down +0.00 +0.00%
Petrohawk Energy C… CAPS Rating: ****
PXP.DL2 $0.00 Down +0.00 +0.00%
Plains Exploration… CAPS Rating: ***
XOM $84.78 Down -2.14 -2.46%
ExxonMobil CAPS Rating: ****
XTO.DL $41.81 Down +0.00 +0.00%
XTO Energy, Inc. CAPS Rating: *****