|A bullseye today for a very small if at all, premium WRD. A stingy stock deal. I'm hoping for the flush out of a white knight. otherwise I'll take the stock and hold CHK for a eventual recovery.|
Chesapeake buying Houston's WildHorse for $3 billion
Early shale developer Chesapeake Energy said Tuesday it is acquiring Houston's WildHorse Resource Development for $3 billion in cash and stock.
Oklahoma City-based Chesapeake is scooping up WildHorse, which is exclusively focused on exploration and production in the northeastern corner of the Eagle Ford shale closer to College Station. In addition to its 420,000 acres in the region, WildHorse also is about to open a new sand mine in the area to service its hydraulic fracturing, or fracking, of wells.
The deal represents a consolidation of major Eagle Ford players with Chesapeake more focused in the southwestern portion of the shale play.
The sale will primarily come in stock - as well as up to $400 million in cash from Chesapeake - so WildHorse shareholders will actually own about 45 percent of the expanded Chesapeake. The Oklahoma producer also will take nearly $1 billion in WildHorse debt. WildHorse will gain two seats on the Chesapeake board, including WildHorse CEO Jay Graham.
Chesapeake Chief Executive Doug Lawler said the deal will provide a big boost to the company's oil production. Chesapeake has historically focused more on natural gas production. The Eagle Ford oil is arguably the highest priced crude in the country because of its proximity to refining and port hubs in Houston and Corpus Christi.
"This transaction accelerates Chesapeake's strategic plan and expands the value-creation opportunities for our shareholders by adding a premier asset at an attractive valuation," Lawler said.
Chesapeake Executive Vice President Frank Patterson said the WildHorse acreage is more than 80 percent undeveloped, so there's lots of room for growth. Chesapeake will use larger rigs than those deployed by WildHorse in order to drill longer horizontal wells and to do so more quickly.
"It's a very quick transition to a full field development plan," Patterson said. "We'll hit the ground running"