In CHK Joint Venture Sale, Jefferies Eyes EOG, CLR

Chesapeake Energy (NYSE: CHK) is selling a third of its 800k acre Powder River and DJ basins leasehold for $1.267 billion or $4,750/acre (undiscounted), Jefferies reports. CNOOC Limited (NYSE: CEO) will pay $570 million in cash at closing (expected at by end of q1), and will fund 66.7% of CHK's share of drilling and completion expenditures until the remaining $697 million obligation is met, which is expected to by end of 2014.

“CNOOC will also have the option to participate in any future leasing in the area or related mid-stream by CHK with a third interest,” Jefferies writes. “Niobrara shale is the primary objective on the subject land, but Frontier and Codell are also prospective.

“JV price considerably better than expected, especially given sparse results to date. While all Niobrara players will benefit, we like EOG Resources, Inc. (NYSE: EOG) and Continental Resources, Inc. (NYSE: CLR) based on valuation and upcoming catalysts.”

Chesapeake Energy closed Friday at $27.33; Continental Resources closed at $61.18; EOG Resources closed at $102.53; and CNOOC closed at $220.49.