The Rising Influence of Rising Affluence

[DewDiligence]

BHP Acquires CHK Shale Assets for $4.75B

[That was a timely post, John! Although this is a relatively small deal for a behemoth like BHP, it increases BHP’s energy portfolio substantially. In FY1H11, oil & gas accounted for 14% of BHP’s overall revenue and 19% of its overall operating profit (http://www.bhpbilliton.com/bbContentRepository/docs/110216SupplementaryInformationBhpBillitonResultsForTheHalfYearEnded31Dec2010.pdf ). That BHP wants to be a bigger player in energy makes me somewhat more inclined to own the stock.

Investors now have yet another data point validating XOM’s big move into shale assets with last year’s purchase of XTO.]

http://online.wsj.com/article/SB10001424052748703800204576158834108927732.html

›By GINA CHON
FEBRUARY 21, 2011, 6:09 P.M. ET

BHP Billiton Ltd. announced Monday it was acquiring Chesapeake Energy Corp.'s Fayetteville shale gas holdings in Arkansas and other assets in a deal totaling about $4.75 billion in cash.

Earlier this month, Chesapeake announced plans to sell about 487,000 acres of its Fayetteville shale holdings as part of its plan to reduce its debt by 25% in two years [#msg-59622539].

The deal would increase BHP's oil and gas reserves by 45%.

BHP's move to acquire Chesapeake Energy's assets comes just three months after the Anglo-Australian company dropped its hostile bid to acquire Canada's Potash Corp. of Saskatchewan Inc. in a $38.6 billion deal. BHP failed to win over the Canadian government, which had the right to reject such an acquisition.

With investors clamoring for cash instead of large acquisitions, BHP announced the resumption of a $4.2 billion share buy-back.

Also last year, BHP and Rio Tinto Ltd. dropped a joint-venture agreement after facing regulatory hurdles. A hostile BHP bid for Rio Tinto in 2008 had also faced opposition from government authorities.

Since then, BHP had said it would invest $80 billion in mining projects but was still open to acquisitions, particularly in the oil and gas sector, despite the setbacks it has faced in making deals.

However, BHP chose to go with a more bite-size acquisition that wouldn't draw the frenzied media and regulatory scrutiny that its past deal attempts have attracted.‹