Total E&P USA announced Friday is buying the remaining 75 percent of Barnett Shale assets from Chesapeake Energy it does not currently own, making it the 100 percent owner and operator of the assets.
Properties in the proposed transaction include approximately 215,000 net developed and undeveloped acres, wells, leases, minerals, buildings and properties. The company, the U.S. subsidiary of Paris-based Total says associated 2016 net production is approximately 65 000 barrels of oil equivalent per day (boe/d).
Total had purchased a 25 percent stake in the Barnett Shale in 2009 for $800 million in cash, plus $1.45 billion in future development costs.
Like many operators, Total has cut spending on U.S. shale production following Although the French group has cut spending on U.S. shale production following the fall in oil prices over the past two years, it said the Barnett Shale deal was opportunity-driven and made possible by its preemption rights.
Under the terms of the transaction, Chesapeake will pay $334 million to Williams, the gatherer and processer of 80 percent of the gas from the Barnett Assets, to terminate its gathering agreement, projected Minimum Volume Commitment (MVC) shortfall payments and fees pertaining to the Barnett Shale assets. Total E&P USA will supplement Chesapeake’s payment with $420 million to Williams for a fully restructured, competitive gas gathering agreement, free of any MVC and with a Henry Hub-based gathering rate instead of a fixed per Mcf fee. Total E&P USA will also pay $138 million to be released from three midstream capacity reservation contracts.
“Over the six years that we have been involved in the Barnett, we have gained an in-depth understanding of the play and the technology,” said José Ignacio Sanz, president and CEO Total E&P USA. “With the new conditions created by the exit of Chesapeake and the associated restructuring of the midstream contracts, we believe that we can extract significant value from the substantial, well located resource base of the play by combining focused upstream operating efficiency, streamlined midstream contract management and marketing savvy through Total’s trading affiliate Total Gas & Power North America.”