BHP Billiton Buys Chesapeake's Shale Gas Asset for $4.75 Billion

Marcus Jacob
22 Feb, 2011
New York City

The benchmark index in Australia declined after tensions in Middle East and North Africa reach oil producing nations. BHP Billiton agreed to acquire shale gas leasehold from Chesapeake Energy for $4.75 billion. Sonic Healthcare fell after it lowered earnings outlook.

[R]5:00 PM Sydney – The benchmark index in Australia declined after tensions in Middle East and North Africa reach oil producing nations. BHP Billiton agreed to acquire shale gas leasehold from Chesapeake Energy for $4.75 billion. Sonic Healthcare fell after it lowered earnings outlook.[/R]

Stocks in Australia declined and crude oil futures surged as tensions flare up in the Middle East and North Africa. Foreign oil companies have begun to evacuate its non-essential staff from Libya.

Col. Muammar Gaddafi’s grip on power is weakening as people take control of Benghazi, second largest city in Libya.

Crude oil futures surged $5.22 a barrel to close at $90.22 and the Australian dollar declined to 99.9 U.S. cents.

The ASX 200 index declined 43.30 or 0.9% to 4,856.70 and All Ordinaries index fell 43.60 or 0.87% to 4,947.30.

BHP Billiton agreed to acquire Chesapeake Energy Corporation’s shale gas leasehold properties in Fayetteville, Arkansas. BHP will acquire U.S. leasehold of 487,000 acres and the midstream pipeline network for $4.75 billion.

The cost of $9,700 per acre price is on the high side of the range of other similar deals in the industry. The leasehold produces more than 400 million cubic feet of gas a day and is expected to have an operating life of 40 years.

Mirvac Group reported after-tax statutory loss of $12.6 million after it wrote down non-core assets by $215 million. Income from its investment portfolio increased 4.3% to $234.7 million.

The property development company said that it will invest $1.4 billion in its core portfolio that is worth $5.8 billion.

Stock Movers

BHP Billiton increased 73 cents or 1.6% to $46.58 and Woodside Petroleum increased 6 cents to $42.64. BHP also said that it has begun its US$10 billion share repurchase program.

Banks and insurance companies declined after an 6.3 magnitude earthquake struck Christchurch, New Zealand.

Bank of Queensland fell 22 cents to $9.93 and Westpac fell 37 cents to $23.70. Suncorp closed down 21 cents to $8.58.

Insurance company Tower declined 3.6% to $1.44 after it confirmed that it will take at least NZ$3.5 million after-tax charge.

QBE Insurance declined 45 cents to $18.45 and Insurance Australia Group fell 7 cents to $3.63.

Sonic Healthcare dropped as much as 6% but closed down 4.4% or 52 cents to $11.30 after the pathology services provider lowered its earnings outlook. The company now said that its earnings will grow at the low end of the range between 5% and 15% for the full year announced earlier.