British Petroleum Moves into Arkansas with Chesapeake Energy Shale Purchase

The second largest oil company in the European Union, British Petroleum (NYSE: BP), has announced that it has entered into an agreement to purchase 25% of Chesapeake Energy's (NYSE: CHK) Fayetteville, Arkansas shale joint venture. British Petroleum is spending $1.9 billion dollars for the interest.

Of the $1.9 billion dollar price tag, $800 million will be paid by BP as they fund the drilling and development costs for Chesapeake's share of the venture through 2009. This maneuver adds 135,000 acres of rich shale deposit acreage to BP's US holdings. The Fayetteville properties are producing natural gas. Sharp appreciation in the price of natural gas has made it very worthwhile to pursue shale production fields which can be fairly expensive to develop.