SYDNEY (AP) - BHP Billiton said Tuesday it agreed to buy a stake in a substantial shale field in the United States for $4.75 billion - the first move by the world's biggest miner into the U.S. shale gas business.
The shale assets form all of Chesapeake Energy Corp.'s interest in the Fayetteville shale field, in Arkansas, including the field's midstream pipeline system.
Shale deposits were previously considered uneconomic to extract gas from but innovations in technology and higher energy prices over the past several years have seen drillers tapping the vast amounts of natural gas in such deposits. More recently they have learned to adapt the new technology to also produce oil.
BHP said in a statement that it would fund the acquisition from its cash reserves. The company's shares rose 1.6 percent in Sydney to Australian dollars 46.58 ($46.63).
"This transaction marks BHP Billiton's entry into the U.S. shale gas business," BHP Billiton Petroleum chief executive Michael Yeager said. The deal will immediately make BHP Billiton a major North American shale gas producer, he said.
BHP Billiton will become the operator of Chesapeake's current production activities from the field, which covers 487,000 acres (197,086 hectares). The company described it as the second-largest position in one of the world's largest gas fields.
The field currently produces more than 400 million cubic feet (11 million cubic meters) of gas a day and includes development options that would substantially increase output over its estimated 40-year life.
Chesapeake said earlier this month that it would sell the assets as part of a plan to reduce debt and focus on more profitable regions.
Chesapeake says it hopes to bring in more than $5 billion, before taxes, from asset sales. The Oklahoma City-based company is aiming to reduce its debt by 25 percent by 2012.
The move will allow Chesapeake to focus more on higher-margin oil assets as oil prices spike and natural gas prices remain low. The Fayetteville shale is not as profitable as several other major U.S. natural gas fields.