French oil major Total SA is taking full control of the Barnett Shale in Texas after Chesapeake Energy Corp.’s recent decision to exit the once prolific gas field to clean up its finances.
Total said on Friday it is exercising its preemption right to acquire the 75% share in the Barnett Shale which it doesn’t already own to become the sole owner and operator of the field.
The move follows Chesapeake’s agreement last month to pay pipeline company Williams Partners LP $334 million in cash to get out of its pipeline contract with the firm in the Barnett.
Total said its Total E&P USA unit will top up Chesapeake’s payment with $420 million to Williams for “a fully restructured, competitive gas-gathering agreement” in addition to paying $138 million to be released from three other contracts.
“With the new conditions created by the exit of Chesapeake and the associated restructuring of the midstream contracts, we believe that we can extract significant value from the substantial, well-located resource base of the play,” Total E&P USA President José Ignacio Sanz said in a statement.
The Barnett Shale was once a big-producing gas field near Fort Worth in North Texas, but in recent years drilling for new wells has waned amid low natural gas prices. In August, there were four rigs drilling in the Barnett, compared with 177 rigs drilling in the Permian Basin of West Texas, according to data from Baker Hughes Inc., an oil-field service company in Houston.
Total’s move could increase its relatively small output in the U.S.
Production from the Barnett currently stands at 65,000 barrels of oil equivalent a day, Total said. The group’s U.S. production last year amounted to 89,000 barrels a day.
Total said its U.S. holdings include a 25% interest in the Chesapeake-operated Utica shale joint venture in Ohio. In the Gulf of Mexico, Total holds a 17% interest in the Tahiti field and a 33.3% interest in the Chinook field. Total and Cobalt International Energy have tied up to explore for oil in the deep offshore Gulf of Mexico.
By William Horobin
Source: MarketWatch
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