Wed, Feb 23, 2011 - Page 10 News List

BHP in US$4.75 billion Chesapeake shale purchase

AFP, SYDNEY

Mining giant BHP Billiton yesterday agreed US$4.75 billion to purchase the Arkansas shale assets of Chesapeake Energy Corp, a move that will boost its oil and gas holdings by 45 percent.

BHP, the world’s biggest miner, said it would take on all Chesapeake’s interests in Fayetteville Shale USA, including the midstream pipeline system, and expected to fund the purchase with cash.

Fayetteville holds the second-largest position in one of the world’s largest gas fields, with about 200,000 hectares, producing more than 400 million cubic feet of gas per day and with a 40-year operating life, BHP said.

“This acquisition will increase BHP Billiton’s net reserve and resource base by 45 percent,” the miner said.

“The acquisition is consistent with BHP Billiton’s strategy of investing in large, long-life low-cost assets with significant volume growth from future development. It also supports our goal of diversification by geography, customer and product,” the firm added.

BHP’s first major acquisition since its US$39 billion bid for Potash Corp was rebuffed by Canada and its iron ore tie-up with Rio Tinto collapsed, the Chesapeake assets will cement BHP’s position as Australia’s top energy firm.

It comes just days after chief executive Marius Kloppers singled out oil and gas as a lucrative market for purchases “where there may be opportunities going forward.”

“This transaction marks BHP Billiton’s entry into the US shale gas business,” BHP petroleum chief J. Michael Yeager said.

“The operated position we are obtaining will immediately make BHP Billiton a major North American shale gas producer,” he added.

Depending on regulatory approval BHP said it expected to close the deal in the first half of this year.

The miner also announced a A$5 billion (US$5.01 billion) off-market share buyback, the beginning of a A$10 billion program flagged in its half-year results earlier this month.

BHP’s half-year profit surged 72 percent to A$10.52 billion due to bullish demand from emerging markets. Its shares were 1.9 percent higher at A$46.72 in late afternoon trade.

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