NEW YORK, July 1 (Reuters) - Chesapeake Energy Corp (CHK.N) and Plains Exploration & Production PXP.N said on Tuesday they have entered into a joint venture in north Louisiana and east Texas.
Plains Exploration has agreed to acquire a 20-percent interest in Chesapeake's Haynesville Shale leasehold for $1.65 billion in cash. It also agreed to fund 50 percent of Chesapeake's 80-percent share of drilling and completion costs for future Haynesville Shale JV wells over a several-year period until an additional $1.65 billion has been paid.
Chesapeake estimates that as of June 30, its Haynesville leasehold was approximately 550,000 net acres. Chesapeake plans to continue acquiring leasehold in the Haynesville Shale play and Plains Exploration will have the right to a 20 percent participation in any such additional leasehold.
The companies plan to develop the Haynesville Shale using 80-acre spacing, which could support the drilling of up to 6,875 horizontal wells on the leasehold.
Assuming that per well estimated ultimate reserves average between 4.5 and 8.5 billion cubic feet of natural gas equivalent, the Haynesville Shale leasehold could hold net unrisked unproved reserve potential of 23-44 trillion cubic feet of natural gas equivalent after deducting an assumed average royalty burden of 25 percent, they said. (Reporting by Steve James; editing by Carol Bishopric)