Chesapeake Energy 2013 Annual Report Download - page 129

CHESAPEAKE ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
121
In 2012, we sold approximately 72,000 net acres of noncore leasehold in the Utica Shale play in Ohio to affiliates
of EnerVest, Ltd. for approximately $358 million in cash.
In 2012, we sold approximately 60,000 net acres of leasehold in the Texoma Woodford play in Oklahoma to XTO
Energy Inc., a subsidiary of Exxon Mobil Corporation (NYSE:XOM), for net proceeds of approximately $572 million.
In 2011, we sold all of our Fayetteville Shale assets in central Arkansas to BHP Billiton Petroleum, a wholly owned
subsidiary of BHP Billiton Limited (NYSE:BHP; ASX:BHP), for net proceeds of approximately $4.65 billion in cash. The
properties sold consisted of approximately 487,000 net acres of leasehold, net production at closing of approximately
415 mmcfe per day and midstream assets consisting of approximately 420 miles of pipeline. Of the total proceeds
received, $350 million was allocated to our Fayetteville Shale midstream assets and a $7 million gain was recorded
on the divestiture of those assets. The remainder of the proceeds was allocated to our Fayetteville Shale natural gas
and oil properties.
Joint Ventures
In 2013, we completed a strategic joint venture with Sinopec International Petroleum Exploration and Production
Corporation (Sinopec) in which Sinopec purchased a 50% undivided interest in approximately 850,000 acres (425,000
acres net to Sinopec) in the Mississippi Lime play in northern Oklahoma. Total consideration for the transaction was
approximately $1.020 billion in cash, of which approximately $949 million of net proceeds was received upon closing.
We also received an additional $90 million at closing related to closing adjustments for activity between the effective
date and closing date of the transaction. We may receive up to an additional $71 million of net proceeds pursuant to
post-closing adjustments. All exploration and development costs in the joint venture are shared proportionately between
the parties with no drilling carries involved.
As of December 31, 2013, we had entered into eight significant joint ventures with other leading energy companies
pursuant to which we sold a portion of our leasehold, producing properties and other assets located in eight different
resource plays and received cash of $8.0 billion and commitments by our counterparties to pay our share of future
drilling and completion costs of $9.0 billion. In each of these joint ventures, Chesapeake serves as the operator and
conducts all drilling, completion and operations, the majority of leasing and, in certain transactions, marketing activities
for the project. The carries paid by a joint venture partner are for a specified percentage of our drilling and completion
costs. In addition, a joint venture partner is responsible for its proportionate share of drilling and completion costs as
a working interest owner. We bill our joint venture partners for their drilling carries at the same time we bill them and
other joint working interest owners for their share of drilling costs as they are incurred. For accounting purposes, initial
cash proceeds from these joint venture transactions were reflected as a reduction of natural gas and oil properties
with no gain or loss recognized. The transactions are detailed below.
Primary
Play
Joint
Venture
Partner(a)
Joint
Venture
Date Interest Sold Initial Proceeds(b)
Total
Drilling
Carries
Total Initial
Proceeds
and Drilling
Carries
Drilling
Carries
Remaining(c)
($ in millions)
Mississippi
Lime Sinopec June 2013 50.0% $ 949 (d) $ — $ 949 $ —
Utica TOT December 2011 25.0% 610 1,422 (e) 2,032 596
Niobrara CNOOC February 2011 33.3% 570 697 (f) 1,267 135
Eagle Ford CNOOC November 2010 33.3% 1,120 1,080 2,200 —
Barnett TOT January 2010 25.0% 800 1,403 2,203 —
Marcellus STO November 2008 32.5% 1,250 2,125 3,375 —
Fayetteville BP September 2008 25.0% 1,100 800 1,900 —
Haynesville
& Bossier FCX July 2008 20.0% 1,650 1,508 3,158 —
$ 8,049 $ 9,035 $ 17,084 $ 731
____________________________________________
(a) Joint venture partners include Sinopec International Petroleum Exploration and Production (Sinopec), Total S.A.
(TOT), CNOOC Limited (CNOOC), Statoil (STO), BP America (BP) and Freeport-McMoRan Copper & Gold (FCX),
formerly known as Plains Exploration & Production Company.