2009-07-22-2009-06-09-2009-06-30

Acquired shallow rights in 519 producing wells in 60+ fields in N. LA, E. TX, AR, with 40,000 undeveloped acres & midstream, gaining 26 MMcf/d.

Privately held Indigo Minerals LLC, Houston, plans to acquire producing properties, undeveloped acreage and certain midstream assets in the Ark-La-Tex region from Chesapeake Energy Corp., Oklahoma City, (NYSE: CHK) for $218 million in cash. The assets include 519 producing wells in more than 60 fields in North Louisiana, East Texas and Arkansas along with 40,000 undeveloped acres, bringing the total acreage position involved in the transaction to above 122,000 net acres. Chesapeake will retain the deep rights including the Haynesville shale formation and below. The midstream assets involve gathering systems directly associated with the Chesapeake operated producing fields. Production is approximately 26 million cubic feet per day net. Indigo will take over operations in 219 Chesapeake wells and will gain a working interest in another 300 nonoperated wells in the region. The operated properties represent about 85% of the transaction value and Indigo plans to drill hundreds of development wells in the future within existing well units and on the largely contiguous 40,000 net undeveloped acres also being acquired, the company reports. The acquisition will make Indigo one of the largest private E&P companies in the onshore Gulf Coast region, with pro forma net production approaching 40 million cubic feet equivalent per day and total proved reserves of 220 billion cubic feet equivalent and more than 150,000 net leasehold acres in North Louisiana, East Texas, Alabama and Arkansas. Additionally, the company owns 635,000 net fee mineral and royalty acres primarily in the Upper Gulf Coast. Indigo was formed in late 2006 as a venture between Yorktown Partners, the Martin Companies, Bank of America Capital Investors and Indigo Management. The effective date is March 1. Closing was expected by June 30. Stifel, Nicolaus & Co. Inc. analyst Michael A. Hall says the acquisition cost implies transaction multiples of $1,787 per acre, $8,385 per flowing Mcfe and, based on the company's 2008 PDP R/P ratio of 9.6 years, $2.40 per Mcfe. "We view the announcement as a positive for Chesapeake as it marks another step in the company's plan to add liquidity to its balance sheet."