The consideration for the transaction will be $570m in cash at closing, which is anticipated in the first quarter of 2011.
CNOOC has also agreed to fund 66.7% of Chesapeake’s share of drilling and completion costs until an additional $697m has been paid.
Chesapeake, as the operator of the project, will conduct all leasing, drilling, completion, operations and marketing activities for the project.
The company is currently operating 16 producing wells in the DJ and Powder River basins that have reached initial production rates of up to 1,000 barrels of oil and three million cubic feet of natural gas per day.
Over the next several decades, the companies plan to develop net unrisked unproved resource potential up to five billion barrels of oil equivalent (after deducting an assumed average royalty burden of 20%).
CNOOC will have the option to acquire a 33.3% share of any additional acreage acquired by Chesapeake in the area and the option to participate with Chesapeake for a 33.3% interest in midstream infrastructure related to production generated from the assets.
