Chesapeake: Eagle Ford JV Ahead

Chesapeake Energy Corporation (CHK) is looking forward to more shale joint ventures (JVs) ahead. The third-largest U.S. natural gas producer is expecting its next JV for its Eagle Ford properties in south Texas, according to an article published in Bloomberg.

The company expects to announce a joint venture in about 30 days with an international company, as stated by chief executive officer Aubrey McClendon, at a investor conference of Barclays Capital, an arm of Barclays plc (BCS), in New York. Chesapeake’s finance chief also made a similar statement at a Credit Suisse Group AG (CS) conference, on September 15.

According to the news website, those familiar with this development believe Reliance Industries Limited, India’s largest company by market value, is planning to invest in these shale gas assets. Moreover, Chesapeake is also aiming to sell a 20% interest in its Marcellus Shale gas operation in Eastern U.S.

Chesapeake holds nearly 600,000 acres in the Eagle Ford shale, worth about $7 billion. Early this year, the company signed a $2.25 billion joint venture deal with France’s Total SA (TOT) to help develop its Barnett Shale properties in Texas.

An increasing trend in developing natural gas resources through JVs can be noticed across the North American markets. Several industry players are prioritizing JVs over other sources of capital for property development.

Last month, SM Energy Company (SM), formerly known as St. Mary Land & Exploration Company, said that it intends to raise $300–$500 million over the next one year via assets sale and JVs.

While natural gas oriented tentativeness remains for the near term, we view favorable fundamentals in the long run. Chesapeake’s reserves and production are heavily natural gas-weighted, but its initiative of deploying more funds toward liquids is commendable. The company is currently rated Neutral with the Zacks #3 Rank (Hold).

CHESAPEAKE ENGY (CHK): Free Stock Analysis Report

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