By OGJ editors
HOUSTON, July 3 -- Plains Exploration & Production Co. agreed to acquire a 20% interest in Chesapeake Energy Corp.'s Jurassic Haynesville shale play leasehold for $1.65 billion in a new joint venture.
Plains also agreed to fund 50% of Chesapeake's 80% share of drilling and completion costs for future JV wells over several years until another $1.65 billion has been paid.
As a result of the transaction, Plains will hold 110,000 net acres of this leasehold and Chesapeake will hold 440,000 net acres.
Chesapeake said it plans to continue acquiring leasehold in the Haynesville shale, and Plains will have the right to 20% participation in any additional leasehold.
The core area of the play spans 3.5 million acres in Texas and Louisiana, Chesapeake told analysts in a conference call.
Acreage on the Texas side may be harder to lease, Chesapeake said. It did not disclose the core area's location but expects core and noncore areas to develop.
Chesapeake said average estimated ultimate reserves in the core area are estimated to average 4.5-8.5 bcf of gas equivalent for each well.
A well in the play now costs $6.5 million. As with other shale plays, these results are likely to improve over time.
The companies currently plan to develop the Haynesville shale using 80-acre spacing, which could support the drilling of as many as 6,875 horizontal wells on the leasehold.
Chesapeake is running five operated rigs in the Haynesville shale play and anticipates operating at least 12 rigs by yearend 2008, at least 30 rigs by yearend 2009, and as many as 60 rigs by yearend 2010. Under this plan, the companies anticipate drilling at least 600 wells in 3 years.