Following US-based independent shale jockey Chesapeake Energy's announcement this week that French major Total will buy a 25% stake in its vast Barnett Shale acreage leasehold in north Texas for $2.25 billion, analysts far and wide have weighed in with pretty much a universal thumbs-up on the deal.
They've analyzed the metrics -- the price per Mcfe of proved reserves and production, future production growth potential and other key numbers -- and come up smelling roses on all fronts. And some are starting to question a widely-held industry anticipation, raised last month after ExxonMobil said it would buy independent XTO Energy for $41 billion, that industry should soon expect a wave of corporate acquisitions of gassy shale companies.
Instead, Chesapeake's transaction with Total -- its fourth shale JV following similar pairings in 2008 with Plains Exploration in the Haynesville Shale, BP in the Fayetteville Shale and Statoil in the Marcellus Shale, all multi-billion-dollar deals -- appears to have cast doubt upon that swift Wall Street prediction, given what appear to be the favorable financials of a joint venture.
Investment bank UBS, in a January 5 report, suggests the notion of gas-operator-as-takeover-target is overstated. "We continue to believe majors prefer to gain access to US shale plays via JVs or asset (not corporate) acquisitions to leverage E&P company expertise and personnel," UBS wrote in a January 5 report, a day after the Chesapeake-Total deal was announced.
The same day, investment bank Tudor, Pickering & Holt noted in its own report that long-term, a handful of US players have "Big Shale" written all over them. They include EOG Resources, Cabot Oil & Gas, Southwestern Energy, Equitable Corporation, Quicksilver Resources, Questar Corporation, Range Resources, Petrohawk Energy and Carrizo Oil & Gas.
"We wonder if Chesapeake's joint ventures move them down the acquisition target list," TPH said.
Meanwhile, one analyst who was skeptical of some of Chesapeake's previous shale JVs as "simply a form of dilution," believes the company's transaction with Total represents a "different kind" of shale exploitation match.
In a January 5 report, BMO Capital Markets analyst Dan McSpirit said Chesapeake's deal with Total says as much about the value of shale-driven companies, particularly those that are natural-gas levered, as it does about Chesapeake and what he called its "cash-on-cash-return-via-JVs model."
Rather than Chesapeake selling reserve potential for immediate cash needs, as may have been true of some previous shale JVs, its most recent venture "is more about Total buying production and a cost structure (at a premium, we add) than it is about Chesapeake giving up any non-proved reserve upside," McSpirit said.
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