Washington (Platts)--31Jan2011/927 am EST/1427 GMT
US independent producer Chesapeake Energy got a better price than expected for selling a one-third stake in its 800,000 Niobrara Shale acres in Colorado and Wyoming, a leading industry analyst said Monday. Oklahoma City-based Chesapeake late Sunday said it had signed a $1.3 billion joint venture deal with the China National Offshore Oil Co. that would see CNOOC pay $570 million upfront and $697 million in drilling costs, enough for about three years' worth of drilling in the play. Jefferies & Company analyst Bijou Perincheril said that breaks down to a sale price of $4,750/acre, higher than previous deals. "Transaction metric better than expected," Perincheril said in a note to clients. "Most of the Niobrara transactions and leases have been in the $2,000/acre acre range. The highest number seen previously was in fact Chesapeake's acquisition of leasehold from Samson oil & Gas for around $3,200 per acre." The Niobrara, located beneath the Powder River Basin and Denver-Julesburg plays is thought to contain billions barrels of crude oil locked in shale, oil that shale gas producers plan to produce using the same techniques as they have for gas: horizontal drilling and hydraulic fracturing. In addition to leases prospective to the Niobrara, Chesapeake's acreage is also prospective to two other shale oil formations, the Frontier and the Codel. As part of the deal, CNOOC also has the option to participate on any future leasing in the area, as well as participate in any midstream projects constructed to get the natural gas and crude oil to market.--Bill Holland, bill_holland@platts.comSimilar stories appear in Gas Daily. See more information at http://bit.ly/GasDaily