It's an adventure keeping tabs on the constant flow of activity at Chesapeake Energy
Although it's not holiday season, Chesapeake is buying itself a pony. Or more accurately, the Oklahoma-based company has said it will spend about $315 million to acquire Bronco Drilling
Most of Bronco's 22 rigs are currently operating in the Williston Basin of Montana and the Dakotas (including the increasingly active Bakken Formation) and the Anadarko Basin. Those rigs will be added to the 95 now owned by Chesapeake's wholly-owned subsidiary, Nomac Drilling. Chesapeake is currently operating 160 rigs, including contracted units, and expects to end next year at about 200 working rigs, although its additional purchases are likely to be minimal.
In announcing the acquisition, which is expected to close in the second quarter, Cheasapeake CEO Aubrey K. McClendon said, "The acquisition of Bronco is a great additional step in our vertical integration strategy and increases confidence in our plan to ramp up drilling activities in … liquids-rich unconventional resource plays." That description would, of course, include the Bakken.
Chesapeake's other significant project involves an apparent effort to sign on a partner to help it to develop its 1.3 million newly-acquired acres in the Utica Shale formation in Ohio. Possible partners could include the likes of Australia's BHP Billiton
As is the case with the liquids-rich Eagle Ford play in Texas, for instance, Chesapeake is leading the pack in gobbling up acreage in the Utica, where expenditures totaling about $1.5 billion have allowed it to lease at least 50% of the field. The Utica lies beneath much of the Marcellus Shale, which is located in several northeastern states.
The Utica produces a combination of oil and gas, but because it's just beginning to be worked, its oil composition hasn't been defined. Earlier this year, Range Resources
Locating a partner will assist Chesapeake in meeting its objective of cutting its debt by 25%, while raising its production by the same percentage by the end of 2012. But rest assured, before long Aubrey McClendon and his team will have other projects and objectives in the works. That's a sufficient reason to ascertain that the company is included on your watchlist.
Total A. is a Motley Fool Income Investor pick. Range Resources is a Motley Fool Inside Value selection. The Fool owns shares of Range Resources. Alpha Newsletter Account, LLC owns shares of Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Fool contributor David Lee Smith doesn't own shares in any of the companies named above. The Motley Fool has a disclosure policy.