Is Total Increasing Its Focus on US Shale Gas? PART 1 OF 2
Total Intercepts Saddle Barnett Resources’ Purchase of CHK Assets
Total acquires Chesapeake Energy’s Barnett assets
On September 9, 2016, French energy giant, Total SA (TOT) announced that it’s exercising its pre-emptive right to acquire 75% interest owned by Chesapeake Energy (CHK) in its Barnett operations joint venture.
Total acquired 25% interest in Chesapeake’s Barnett shale assets in January 2010 for $2.25 billion.
By exercising its pre-emptive right, Total will be the sole owner of these assets which include around 215,000 net developed and undeveloped acres. It also includes leases, wells, minerals, and other properties.
This move comes behind Chesapeake’s recent decision to exit the Barnett shale.
Chesapeake planned to sell its interest in the Barnett Shale to Saddle Barnett Resources, which is backed by First Reserve—a private equity company.
Chesapeake has been aggressively focusing on asset sales to boost its balance sheet. In May 2016, the company agreed to sell 42,000 net acres in the Anadarko Basin Stack play to Newfield Exploration (NFX). Chesapeake and Newfield Exploration make up ~2.4% of the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).
Supplementing Chesapeake’s $334 million payment to Williams Partners (WPZ), which gathers and processes 80% of the gas from the joint venture, Total will pay $420 million to Williams Partners for a “fully restructured and competitive agreement.” Also, Total intends to pay another $138 million to be released from three other midstream contracts.
Subject to third-party consents, Total expects to complete the deal in 4Q16.
PART 2
Is Total Increasing Its Focus on US Shale Gas? PART 2 OF 2
Is Total Increasing Its Focus on US Shale Gas?
Total’s stock price reaction
After the news of its latest announcement on September 9, 2016, Total’s (TOT) stock closed the day ~3% lower at $48.74. However, the stock rose by 1.1% in after-market trading.
Total’s stock has increased 8% YoY (year-over-year). Meanwhile, its peers Royal Dutch Shell (RDS.A) and Chevron (CVX) have increased ~1.4% and 33% YoY, respectively.
Is Total increasing its stronghold in the US?
Along with its 25% interest in the Barnett upstream joint venture with Chesapeake Energy (CHK), Total also holds 25% interest in the Utica shale joint venture with Chesapeake—the operator.
Coming to the Gulf of Mexico, Total owns 17% interest in the Tahiti field. It holds 33.3 % in the Chinook field.
In addition to this, Total and Cobalt International Energy (CIE) have partnered to form a “strategic alliance” for oil exploration in the deep offshore Gulf of Mexico.
Until now, Total focused more on the Gulf of Mexico. By becoming the operator of the Barnett assets, Total is increasing its US shale presence.
According to Total, the associated 2016 net production from the Barnett assets operated by Chesapeake is ~65,000 barrels of oil equivalent per day.
Speaking about its recent announcement, Total’s CEO said in a press release, “We believe that we can extract significant value from the substantial, well located resource base of the play by combining focused upstream operating efficiency, streamlined midstream contract management and marketing savvy through Total’s trading affiliate Total Gas & Power North America”. He further said, “Increasing our stake in the Barnett shale supports Total’s global strategy to be a leader in natural gas.”
Total makes up ~10% of the First Trust Indxx Global Natural Resources Income ETF (FTRI).
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