Parallel Petroleum Corporation (PLLL)

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Chesapeake gains stake in Parallel's gas field
Oil & Gas Journal

By OGJ editors
HOUSTON, Mar. 2 -- Chesapeake Energy Corp. is gaining half of Parallel Petroleum Corp.'s interest in a Barnett shale gas field in exchange for Chesapeake paying to drill the wells.

Parallel had 35% interest in a Barnett shale project, and Chesapeake already owned the rest. The agreement pertains to all wells drilled on Parallel's Barnett shale leasehold from Nov. 1, 2008, through Dec. 31, 2016.

At the time Chesapeake commences drilling a well, Parallel will assign to Chesapeake 100% of its leasehold interest. Parallel retains a 50% reversionary interest that will vest after Chesapeake recovers 150% of its costs.

Chesapeake will fund all Parallel's costs for drilling, completing, and operating wells until 150% payout has been reached. Then, 50% interest will revert back to Parallel, and Parallel will resume paying its costs and receive revenues attributable to its 50% stake.

For all wells drilled after Jan. 1, 2017, Parallel will pay all costs and receive all revenues attributable to its 50% reversionary interest. Parallel is based in Midland, Tex.

THIS ALLOWS PARALLEL TO CONTINUE TO DRILL THEIR LAND BUT DEFERS THE COST BY PAYING CHESAPEAKE ONLY AFTER THE WELLS PRODUCE.