China Refiner Deals for Gas Assets

Monday, February 25, 2013 @ 05:02 PM gHale

In a move to increase its presence in the North American shale gas industry, China Petroleum & Chemical Corp. (Sinopec) will pay $1.02 billion to purchase half of Chesapeake Energy Corp.’s Mississippi Lime oil and gas properties in Oklahoma.

Output from shale fields in the United States and Canada has jumped over the last three years due to the advent of drilling methods such as hydraulic fracturing, or fracking.

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Companies in China, which has the largest shale reserves in the world, are chomping at the bit to get as much drilling information as possible in unconventional fields.

Along those lines, China’s state-owned CNOOC Ltd. bought Canadian oil and gas company Nexen Inc. for $15.1 billion, while Pioneer Natural Resources Co said last month it would sell a stake in its assets in the Wolfcamp shale field of Texas to Sinochem Group SINOC.UL for $1.7 billion.

Sinopec, Asia’s largest oil refiner, will buy 50 percent of Chesapeake’s 850,000 acres of net oil and natural gas leasehold properties in the Mississippi Lime shale field in northern Oklahoma, the companies said.

Chesapeake has about 2.1 million net acres of leasehold in the Mississippi Lime region, which straddles northern Oklahoma and southern Kansas.

Chesapeake’s production from the Mississippi Lime region jumped 208 percent to an average of 32,500 barrels of oil equivalent per day in the fourth quarter, the company reported this month.

About 45 percent of the total output was oil, 46 percent was natural gas and the rest was natural gas liquids.

Sinopec’s deal with Chesapeake, the second-largest gas producer in the United States, will help the Oklahoma City-based company cut down its debt, which stood at $12 billion as of December 31.

Chesapeake, which closed $12 billion of asset sales last year, is targeting asset sales of $4 billion to $7 billion in 2013, the company said in a presentation earlier this month.

Chesapeake said in December it would sell most of its natural gas processing and gathering assets for $2.16 billion to Access Midstream Partners LP.

Sinopec struck a deal with Devon Energy Corp. in January 2012 to buy a third of the U.S. oil and natural gas producer’s interest in five developing fields for about $2.2 billion.

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