The FINANCIAL -- Total SA, Europe’s third-largest oil producer announces that its subsidiary, Total E&P USA, Inc., has signed on December, 30, 2009 an agreement to enter into a joint venture with United States based Chesapeake Exploration, L.L.C., a subsidiary of Chesapeake Energy Corporation (NYSE:CHK) of Oklahoma City, Oklahoma.

Total E&P USA Inc will take a 25 percent stake in Chesapeake's upstream Barnett Shale assets for $800 million in cash, the groups said in statements on Monday, according to Reuters. Total will provide an additional $1.45 billion by funding 60 percent of Chesapeake's share of drilling and completion expenditures until the end of 2012, Chesapeake said.

The same source reports that the deal follows similar investments by European rivals in North American shale gas after gas prices fell sharply in the past 1 1/2 years. Chesapeake has made similar tie-ups with BP (BP.L) and Statoil (STL.OL).

In the framework of the joint venture, Chesapeake plans to continue acquiring leasehold in the Barnett and Total will acquire its 25% share of the new acreage on promoted terms until December 31, 2015, according to Fox Business. After such date, Total's right to acquire its 25% proportionate share of Chesapeake's leasehold will be on an unpromoted basis and Total will also begin paying 25% of Chesapeake's support costs related to the joint venture's corporate development activities.

According to the same source, Christophe de Margerie, Chief Executive Officer of Total, stated, "Total is pleased to be making a strategically important move by entering into the U.S. shale gas business with Chesapeake, the world's leading shale gas operator. This joint venture will provide us with a solid position in an attractive long-term resource base under competitive terms. It will allow Total to develop its expertise in unconventional hydrocarbons in order to expand its unconventional business worldwide. Additionally, this transaction adds yet another key support for Total to build the gas value chain position the Group has established in the U.S., the world's largest and most liquid natural gas market, with our existing capacity rights in the Sabine Pass LNG terminal and our gas trading and marketing organization. Total is conscious of the environmental aspect linked to producing shale gas and has confidence in Chesapeake's capacity to contain the impact of the Barnett Shale gas' operations on the environment and respect local and federal regulations and guidelines."

The assets include about 270,000 net acres of leasehold in the core and Tier 1 areas of the Barnett, about 700 million cubic feet of natural gas equivalent per day of current net production and about 3 trillion cubic feet of natural gas equivalent of proved reserves, according to the statement from Chesapeake, Business Week reports.

Fox Business informs that Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We are very pleased to announce our fourth joint venture transaction in the Big 4 shales and we are honored to partner with Total to further develop the Barnett Shale. Total is one of the largest and most well respected industrial enterprises in the world. It was established in 1924, is the fifth largest integrated natural gas and oil company, has approximately 97,000 employees and has a market valuation exceeding $150 billion. Total approached Chesapeake about a Barnett joint venture approximately seven months ago and during this time the companies have worked diligently and thoughtfully to structure this mutually beneficial joint venture.

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