Sinopec Gets Two Thirds Discount with Deal
The US$1.02 billion deal entered into China Petrochemical for Chesapeake Energy Corp shale oilfield interests is just one third of its actual value. The deal involves a fifty percent interest in 850,000 acres that the US company controls at the Mississippi Lime formation. Under the deal, the price of each acre is set at US$2,400. This is much lower than the US$7,000 to US$8,000 valuation that Chesapeake made during last July 2011 presentation.
The deal includes drilling rights with wells that is estimated to produce 34,000 barrels of crude oil per day in the last three months of 2012. Sinopec would have operational control, especially drilling decisions as well as cost decisions for the venture.
With the deal though, Chesapeake share values rose by 1.6% to US$19.42 after posting a 6.8% decline in the last three months. Overall, the share values lost by 22% of market value in the past year.