On November 4, 2011, Chesapeake announced a joint venture agreement whereby they agreed to sell part of its holdings in the Utica Shale for $2.3 B.  The announcement claimed that CHK would get $649 M from an undisclosed buyer in exchange for a 25% interest in 650,000 acres in Ohio's wet gas and volatile oil window.  It's partner, Enervest, would receive $90 M in cash.  Further, the buyer, now disclosed as France's TOTAL SA, agreed to pony up $1.5 B toward Chesapeake's drilling costs and $210 M toward ENV's costs.

Aubrey McClendon, then CHK's CEO and President of the Board, claimed the transaction would cover all of their acquisition costs in the field while selling the equivalent of only 10% of their acreage.  Combined net proceeds likely netted them at least $3.4 B total.  This transaction became the life blood to fund drilling for CHK and ENV as well as Aubrey's new American Energy Partners, who is participating in a JV covering much of the acreage CHK leased under his leadership.

Talk about a shot in the arm.  These funds have enabled them to collectively drill over 500 wells to explore the Utica here in Ohio.  It remains to be seen how this will work out long-term for TOTAL, but it has been a God-send for the other participants.  They will surely be sad if the agreement ends as expected by year-end 2014. 

It will be interesting to see if their drilling pace falls accordingly.  Aubrey has proven himself to be a master fund raiser and, if they continue the recent rash of joint ventures, he may well provide the drilling capital necessary to continue at today's pace.  CHK's challenging balance sheet may well prohibit them from being an attractive investment partner for those less brazen than Aubrey.  ENV has previously signaled that they are more interested in shallow production and mid-stream activities, but they have surely enjoyed a nice ride as a result of the initial agreement.  However, they are a very unlikely source to provide or raise significant drilling funds to propagate further drilling for the partners.

Considering their investment in acquisition, due diligence, drilling and mid-stream projects, it is unthinkable that their activities will be significantly curtailed.  However, it will be interesting to see if a similar agreement is forthcoming, whether it be with TOTAL, Sinopec, CNOOC or other from overseas sources.