France's Total Expands in Texas -- WSJ

By William Horobin

PARIS -- French oil major Total SA is taking full control of the Barnett Shale oil-and-gas leases in Texas that it shared with joint-venture partner Chesapeake Energy Corp., after the U.S. shale producer decided to exit the once-prolific gas field to shore up its finances.

Total said on Friday it is exercising rights to acquire a 75% share in the Barnett Shale assets to become the sole owner and operator of 215,000 partially developed acres of the field near Fort Worth in North Texas.

The move follows Chesapeake's agreement last month to pay $334 million to Williams Partners LP to get out of its pipeline contract with the pipeline operator in the Barnett Shale formation. At the time, Chesapeake said it was transferring its interests in the fields to Saddle Barnett Resources LLC, a private equity-backed company based in Dallas.

Total, which is pre-empting Saddle's deal, said its U.S. exploration and production unit will add $420 million to what Williams is receiving to achieve "a fully restructured, competitive gas-gathering agreement," in addition to paying $138 million to be released from three other contracts.

The company said it expects to complete the deal in the fourth quarter, subject to "third-party consent of the arrangement."

"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 substantial, well-located resource base of the play," Total E&P USA President José Ignacio Sanz said in a statement.

The Barnett Shale was once a big-producing gas field, but in recent years drilling for new wells has waned amid low natural gas prices. At the start of September, there were just three rigs drilling in the Barnett, compared with 202 rigs drilling in the Permian Basin of West Texas, according to data from Baker Hughes Inc., an oil-field service company in Houston.

Total's move, which could increase its relatively small output in the U.S., is part of a wider pivot the company is making to pump more natural gas than oil.

The company said the production from the Barnett fields that it will take over from Chesapeake stands at 65,000 barrels of oil equivalent a day. Total's U.S. production last year amounted to 89,000 barrels a day.

Total said its U.S. holdings include 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. The company has also teamed up with Cobalt International Energy to explore for oil in the deep offshore of the Gulf of Mexico.

Corrections & Amplifications: Total SA of France is buying oil-and gas leases and other energy assets in the Barnett Shale formation of North Texas from Chesapeake Energy Corp. An earlier version of this story incorrectly stated Total was buying all of the Barnett Shale that it didn't already control. (Sept. 9, 2016)

Write to William Horobin at William.Horobin@wsj.com

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September 10, 2016 02:47 ET (06:47 GMT)

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