Chesapeake Energy announces it has entered a joint venture with China's state-owned Sinopec in a $1.02 billion deal. The agreement has Sinopec purchasing a 50% undivided interest in 850,000 of Chesapeake's net oil and natural gas leasehold acres in the Mississippi Lime play in northern Oklahoma.
93% of the $1.02 billion price tag is due upon closing on the 425,000 net acre offtake. Chesapeake will conduct all leasing, drilling, completion, operations and marketing activities for the joint venture. The transaction is anticipated to be completed in the second quarter of 2013.
Steven C. Dixon, Chesapeake’s Chief Operating Officer, said, “We are excited to announce the execution of our Mississippi Lime joint venture with Sinopec, which moves us further along in achieving our asset sales goals and secures an excellent partner to share the capital costs required to actively develop this very large, liquids-rich resource play.”
The move comes as Chesapeake is struggling to profit in the balance between crude oil and natural gas production. Meanwhile, China's balance sheet shows them paying entirely too much for imported crude oil. The boost in Chesapeake's revenue should put them back in the black, or at least a little closer, and China will have access to an estimated 34,000 barrels of U.S. crude oil per day.