Integrated oil and gas company TOTAL S.A. (TOT) expanded its footprint in the United States, through a tactical deal with Chesapeake Energy Corporation‘s (CHK) arm – Chesapeake Exploration, L.L.C., and partner EnerVest Ltd.
Per the agreement, TOTAL will acquire a 25% share in Chesapeake’s and EnerVest’s holdings in the liquids-rich area of the Utica Shale play. TOTAL has paid $700 million for the portion of the play, which spreads across 10 counties on the eastern side of the state of Ohio.
Chesapeake and EnerVest jointly own 619,000 acres, or 542,000 net acres and 77,000 net acres, respectively. TOTAL acquired 25% each from each, taking its holding in this liquid rich play to 155,000 acres.
TOTAL has also became part of the Chesapeake and EnerVest Ltd. joint venture by agreeing to pay up to $1.63 billion over a period of 7 years, that will account for 60% of the two partners’ capital expenditure in the Utica Shale. Per the agreement, TOTAL will also have the right to acquire a 25% share in any new acreage acquired by Chesapeake in the Utica Shale.
The Utica Shale, located a few thousand feet below the Marcellus Shale, is expected to have a huge reserve of oil and natural gas, and Chesapeake is one of the early players to foray into the play. TOTAL with its long-term strategy to extend its global reach has rightly selected Chesapeake to venture out in the oil rich Utica Shale.
TOTAL continues to leverage its strong financial position to make the outright acquisition as well as continue with aggressive drilling in its worldwide assets. We believe TOTAL’s exposure in the Utica Shale will be a positive catalyst for the company in the years to come.
TOTAL S.A. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
France-based TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations spanning five continents.
To read this article on Zacks.com click here.
Zacks Investment Research
