BHP Billiton says it has agreed to buy a substantial shale field in the United States for $US4.75 billion ($4.71 billion), prompting the shares to rise 3 per cent.
Shares in the world’s biggest mining company gained $1.37, or 2.99 per cent, to $47.22 by 10.09am (AEDT). The stock closed at a 2 1/2 year high $47.36 on February 15.
The shale assets form all of Chesapeake Energy Corp’s interest in the Fayetteville Shale field, in Arkansas, including the field’s mid-stream pipeline system.
BHP said that it would fund the acquisition from cash resources.
“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,” BHP Billiton said.
“It also supports our goal of diversification by geography, customer and product.
“BHP Billiton will become the operator of Chesapeake’s operated interests in the field.”
The miner and energy producer announced the purchase as it also said it would begin immediately a $5 billion off-market buyback of its shares, part of the $10 billion capital management program that it flagged in its half year results last week.
Chesapeake’s Fayetteville shale assets include around 487,000 acres of leasehold and producing natural gas properties, producing over 400 million cubic feet of gas per day.
They were “the second largest position in one of the largest gas fields in the world”, BHP Billiton said.
“This acquisition will increase BHP Billiton’s net reserve and resource base by 45 per cent.”
The assets included development options that would support substantially higher production over a 40 year operating life, BHP said.
“The assets acquired generate strong margins and returns on capital at today’s prices,” BHP Billiton said.
BHP Billiton expected to close the deal in the first half of 2011, pending regulatory approvals.
The chief executive of BHP Billiton Petroleum, Michael Yeager, said the Fayetteville Shale assets were “a world-class onshore natural gas resource”.
“This transaction marks BHP Billiton’s entry into the US shale gas business.
“The operated position we are obtaining will immediately make BHP Billiton a major North American shale gas producer.
“It provides access to a competitive, long-life resource basin that benefits from our ability to invest through the economic cycles.”
BHP Billiton said it may vary the size of the off-market share buyback.
Originally posted here:
BHP Billiton Spends $4.7bn On US Shale Field