Chesapeake Energy Corporation has agreed to acquire $530 million of Mid-Continent natural gas assets in two transactions. From El Paso Corporation, Chesapeake is acquiring an internally estimated 328 billion cubic feet of gas equivalent (bcfe) of proved gas reserves, 70 bcfe of probable and possible gas reserves, 293,000 leasehold acres and current production of 67 million cubic feet of gas equivalent (mmcfe) per day for $500 million. The El Paso proved reserves have a reserves-to-production index of 13 years, are 96% natural gas (or natural gas liquids) and are 71% proved developed.
From Vintage Petroleum. Inc., Chesapeake is acquiring an internally estimated 22 bcfe of proved gas reserves, 8 bcfe of probable and possible gas reserves and current gas production of 3.5 mmcfe per day for $30 million. The Vintage proved reserves have a reserves-to-production index of 17 years, are 97% natural gas and are 56% proved developed.
The transactions will increase Chesapeake's currently estimated proved reserves (pro forma for the ONEOK closing that occurred in January 2003) to 2.75 tcfe (an increase of 15%) and Chesapeake's projected April 2003 production rate to approximately 640 mmcfe per day (an increase of 13%). The company intends to finance the acquisitions by issuing a combination of equity and long-term debt.
After allocating $50 million of the El Paso purchase price to unevaluated leasehold for El Paso's probable and possible reserves, Chesapeake's acquisition cost for the proved reserves will be $1.37 per mcfe. The acquisition is expected to close before March 31, 2003, will have an effective date of April 1, 2003 and is subject only to satisfaction of customary closing conditions.
After allocating $3 million of the Vintage purchase price to unevaluated leasehold for Vintage's probable and possible reserves, Chesapeake's acquisition cost for the proved reserves will be $1.23 per mcfe. The acquisition is expected to close before March 31, 2003 and the cash consideration will be paid at closing. The transaction's effective date will be February 1, 2003 and is subject only to satisfaction of customary closing conditions.
