Current TOT Stock Info

Total exercises its preemption rights for 100% ownership of Barnett Shale assets

French oil-major Total (ticker: TOT) announced that it will exercise its preemption right to acquire the remaining 75% interest in its jointly held Barnett Shale operations in North Texas from Chesapeake Energy (ticker: CHK).

Total E&P USA, the company’s U.S. branch, has held 25% interest in the assets since December 2009. Total purchased its original 35% share of the assets for $800 million in cash, plus $1.45 billion toward the field’s development over six years.

The properties include approximately 215,000 net developed and undeveloped acres, wells, leases, minerals, buildings and properties, Total said in its press release. Production associated with the assets was 65 MBOEPD in 2016.

Chesapeake pays to Williams $334 million

Under the terms of the agreement, Chesapeake will pay $334 million to Williams (ticker: WMB), which gathers and processes 80% of the gas from the assets, to terminate its gathering agreement. Total will then pay $420 million to Williams for a fully restructured gas gathering agreement, according to the company’s statement, adding that TOT will pay an additional $138 million to be released from three other midstream contracts. Total’s new agreement will have a Henry Hub-based gathering rate instead of a fixed per-Mcf fee.

The French company has been cutting back on its shale production following the fall in oil prices, but the company feels the unique situation created by Chesapeake’s exit makes exercising their preemption rights the correct move.

“Over the six years that we have been involved in the Barnett, we have gained an in-depth understanding of the play and the technology,” said Total E&P USA President and CEO Jose Ignacio Sanz. “With the new conditions created by the exit of Chesapeake and the associated restructuring of the midstream contracts, we believe that we can extract significant value from [the assets.]”

Total also holds a 25% interest in the Chesapeake-operated Utica shale joint venture in Ohio. In the Gulf of Mexico, Total holds a 17% interest in the Tahiti field and a 33.3% interest in the Chinook field. Additionally, Total and Cobalt International Energy are partnering to explore for oil in the deep offshore Gulf of Mexico.

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