Chesapeake announced early last week that they have sold a 5-year volumetric production payment (VPP) to an affiliate of Barclays Bank for $1.15 billion. In other words, they seem to be monetizing future production in an effort to build capital, possibly to invest in more liquid-rich plays. Included in the VPP, Barclays will get approximately 390 Bcf of proved reserves and roughly 280 Mcf/d of net production in 2011.
This type of transaction is not new to Chesapeake. Since the end of 2007 they have sold roughly 1.0 Tcf in VPPs which amounts to around $4.7 billion and puts the price per Mcf at roughly $4.70. To add some more color, I averaged the wellhead price of natural gas since December 2007, when Chesapeake participated in their first of 8 VPPs, and it came out to be $5.56 per Mcf (I pulled the data from the US Energy Information Administration website).
Also, here is a historical production graph from HPDI that shows Chesapeake production from the Barnett Shale.
To learn more, visit the Barnett Shale Folder in the Unconventional Updates in DI’s DNA.