US independent Chesapeake Energy has struck a $700-million deal that will transfer its remaining Eagle Ford Shale holdings to smaller oil and gas company SilverBow Resources. The agreement involves almost 42,000 acres and approximately 540 wells in the condensate window of the Eagle Ford.
Chesapeake’s reported production from the property during the second quarter of the year was almost 29,000 BOE/D; 60% liquid hydrocarbons. The Oklahoma City-based company said the asset’s remaining proven reserves as of year-end 2022 amounted to about 124 million BOE.
The transaction counts as the final act of Chesapeake’s long-anticipated divestment of its liquids-rich Eagle Ford asset that was one of the region’s largest at nearly 450,000 net acres. The company shifted its strategy a year ago to focus on operations in the Marcellus Shale of Pennsylvania and Louisiana’s Haynesville Shale which have made it the second-largest gas producer in the US.
Chesapeake highlighted that with its sale to SilverBow the total bounty for the south Texas position has surpassed $3.5 billion. Terms of the latest deal, which is expected to close by year’s end, will see Houston-based SilverBow issue $650 million to Chesapeake upon closing and the remaining $50 million in 2024.
SilverBow may owe up to another $25 million to Chesapeake should oil prices average between $75 to $80/bbl for the year following the date of closing. The contingency fee would jump to $50 million if oil prices averaged over $80/bbl during the period.
In February, Chesapeake struck a $1.4-billion deal with UK-chemical company INEOS for a large swath of Eagle Ford acreage that included some 2,300 producing wells. A month prior, Chesapeake began its exit from south Texas in a $1.4-billion sale of a separate position that included nearly 1,350 wells to WildFire Energy.
Chesapeake acquired most of its south Texas position (~420,000 acres) while making a shift from gas to liquids production in 2018 when it paid almost $4 billion to acquire WildHorse Resource Development.
