BHP to Buy Chesapeake’s Arkansas-Based Gas Business for $4.75B

BHP Billiton (BHP), the world’s biggest mining company, said on Monday afternoon that it would acquire Chesapeake Energy’s (CHK) Fayetteville shale-based natural gas assets in northern Arkansas for $4.75 billion in cash. The deal, which BHP expects to fund from the co.’s cash resources ($12.5 billion mrq), is the first by the Anglo-Australian giant following its failed effort to buy the Potash Corporation of Saskatchewan (POT) last year. The company previously stumbled in its hostile attempts (the saga began on November 8, 2007) to acquire Rio Tinto (RIO) for $149 billion, and then form a joint venture with its rival in recent years.

Chesapeake’s Fayetteville shale assets include approximately 487,000 acres of leasehold and producing natural gas properties located in Arkansas. This is the second largest position in one of the largest gas fields in the world.

“The Fayetteville Shale is a world-class onshore natural gas resource”, Mike Yeager, chief executive of BHP Billiton Petroleum, said in a statement. “The operated position we are obtaining will immediately make BHP Billiton a major North American shale gas producer.”

“Longer term, the expertise we gain here will be usable elsewhere as we continue to grow our business,” Yager added.

The Fayetteville deal will increase BHP Billiton’s net reserve and resource base by 45%, BHP said. The assets produce more than 400 million cubic feet of gas per day.

The deal marks BHP’s first attempt at picking up assets since failing on three multi-billion dollar deals over the past three years.

BHP today also announced a A$5 billion off – market share buyback as part of the $10 billion program unveiled Feb. 16.

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