By OGJ editors
HOUSTON, Oct. 4 -- Chesapeake Energy Corp. announced an agreement to acquire Columbia Natural Resources LLC from Triana Energy Holdings LLC for $2.95 billion, including the assumption of $75 million in debt and liabilities related to CNR's prepaid sales agreement and hedging positions.
Subject to regulatory approvals, the transaction is expected to close by Dec. 15. Triana was formed in 2001 by Metalmark Capital LLC as a Morgan Stanley Capital Partners portfolio company.
Columbia produces Appalachian basin gas and owns 4.1 million net acres. Through this transaction, Chesapeake expects to acquire 1.1 tcf of proved gas equivalent reserves and 1.4 tcf of probable and possible reserves. The properties primarily are in West Virginia, Kentucky, Ohio, Pennsylvania, and New York.
Chesapeake's acquisition cost for the 1.1 tcfe of proved reserves will be $1.45/Mcf of gas equivalent. The Oklahoma City company estimates that its all-in cost of acquiring and developing the total 2.5 tcf will be $2.48/Mcf of gas equivalent, exclusive of the negative working capital and prepaid sales and hedging liabilities to be assumed.
CNR's proved reserves are long-lived, have low production decline rates, are 99% gas, and are 70% proved developed. On the acquired properties, Chesapeake has identified 1,316 proved undeveloped locations, 6,286 probable locations, and 1,833 possible locations for an estimated drilling inventory of more than 15 years.
As of June 30 and pro forma for the acquisition, Chesapeake will own 7.1 tcf of proved gas equivalent reserves (which will be 92% gas and 100% onshore) and 6.4 tcf of unproved reserves. The company intends to spend at least $200 million/year and expects 5-10%/year production growth from the CNR assets "for the foreseeable future."
Aubrey K. McClendon, Chesapeake's chief executive officer, said Chesapeake's pro forma 6.5 tcf of proved gas reserves will be the third largest in the US, trailing ExxonMobil Corp. and ConocoPhillips.
Although new for Chesapeake, the Appalachian basin has similarities with the Midcontinent, with which Chesapeake is familiar, McClendon said. He noted that most drilling in the Appalachian basin has been shallow.