Europe's leading oil and gas players have beaten down the door to get at Chesapeake Energy's
I was wondering when Total would get on board. Royal Dutch Shell has made its move on the Montney in Canada, while Eni
Foreign players have made it no secret that their intent is to learn the ways of the American shale tamers, and then take that technology global. Total clearly shares this mind-set. The two companies today mentioned the possibility of collaborating in both the Eagle Ford shale, and various Canadian plays that Total has its eye on.
In a recent interview with Dow Jones Newswires, Petrohawk Energy's
This company racked up a lot of debt as it amassed its giant collection of shale assets, and each joint venture allows Chesapeake to deleverage. This particular deal is bringing in $800 million up front, with an additional $1.45 billion in drilling carries (meaning that Total covers 60% of Chesapeake's share of the costs) over the next three years or so. That's about the same breakdown, in percentage terms, as the Statoil joint venture.
These drilling carries have the effect of supercharging Chesapeake's rates of return. They also secure a big part of Chesapeake's capital budget, regardless of what happens to natural gas prices. This last point is important, because Chesapeake, by lightly hedging its production, is taking one of the biggest bets on rising gas prices of any of its peers.
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool owns shares of Chesapeake, and has a disclosure policy.