In what may become a stroke of corporate brilliance, or a gamble, BHP Billiton today announced it will purchaseChesapeake Energy Corps Arkansas shale gas assets for $4.75 billion in cash.
In a bid that US gas prices will continue to increase over the mid term, the move will see BHP’s US gas and oil reserves more than double.
Platypus Asset Management Ltds Prasad Patkar commented:
It’s a bet on long-term U.S. gas prices going higher, they’ve entered a new business, but have met the criteria that they have articulated for acquisitions, that is, tier-one, low-cost, long-life and expandable assets.
The market seemed to like the news, with BHP shares up $1.01 to $46.86 halfway through the trading day on the ASX in Sydney.
As part of the deal, Chesapeake agreed to sell all of its interests in about 487,000 net acres of properties in central Arkansas. The Bank of Nova Scotia is guiding BHP on the transaction, and Jefferies Group Inc. is working with Chesapeake.
This new purchase by BHP is the largest since it bought WMC Resources in Western Australia for $7.6 billion in 2005. This makes BHP an extremely powerful resource company with major assets in Western Australia and the Gulf of Mexico.
