­BHP’s shale gas deal gets a thumbs up from the market

Marion Dakers
BHP Billiton’s share price rose yesterday after details of its $4.75bn (£2.94bn) purchase of US gas firm Chesapeake’s assets and $5bn buy-back filtered through the market.

BHP, which announced the plans to the London market yesterday, said it would take over Chesapeake’s shale gas reserves in the Fayetteville field in Arkansas to gain an exposure to the growing shale gas industry.

The acquisition, BHP’s largest in six years, pits it against China in a race for global energy assets, following state-owned PetroChina’s C$5.4bn (£3.38bn) agreement?to buy shale gas stakes from Canada’s Encana earlier this month.

BHP also announced plans for a $5bn off-market buyback of its Australia-listed shares as part of its $10bn buyback announced last week.

Charles Kernot at Evolution Securities welcomed the Chesapeake deal, saying in a note to investors that “shale gas has the scope to grow into a significant business line for BHP Billiton”.

BHP shares rose 1.6 per cent to £24.13 yesterday, beating a general decline in the FTSE 100



BHP has hired Barclays Capital to advise on its deal with Chesapeake, rounding off a lucrative few weeks for Mark Warham, co-head of European M&A at the bank.

The BHP advisory job comes closely after Warham’s team brought in the London Stock Exchange as a client for its £4bn merger with Canadian exchange TMX earlier this month.

Market chatter named energy specialist Julian Vickers as the banker who won the BHP mandate for BarCap yesterday, although the bank declined to comment on this.

Vickers helped set up the bank’s energy and resources team alongside Jim Peterkin.

Both Warham and Vickers joined BarCap in May 2009 to beef up its M&A team.

Warham moved from Morgan Stanley, where he was head of UK M&A, while Vickers was poached from Citigroup.

Leeds-born Warham is currently a member of the Takeover Panel, and served as its director general between 2005 and 2007.

Advising BHP on the US aspects of the deal is Scotia Waterous, the oil and gas M&A specialist owned by Canada’s Scotiabank.

Chesapeake Energy is being advised by Jefferies.