Big Oil Comes to Barnett Shale of Texas

First Exxon buys XTO Energy, now France's Total S.A., the fifth largest oil and gas company in the world, has purchased 25 percent of Chesapeake Energy Corp's Barnett Shale assets for $2.25 billion.

It's not unusual for big companies to buy out small independents in any field, not just the oil and gas field. This signals that the majors believe natural gas has a lot of potential, but these companies could have better timing. They missed out on the natural gas price boom that occurred a few years ago. Instead, they're entering the picture when environmental and public safety concerns have come up. Because of these worries, the oil and gas play may see stiffer regulations, which would make ownership more expensive for the companies.

This deal allows Total to build expertise in unconventional hydrocarbons so it can grow in this area on an international scale. Furthermore, natural gas and oil markets no longer move in tandem. Instead, it's a time when oil prices are going up while natural gas prices remain stalled. As a result, it gives big oil companies like Exxon and Total the resources to invest in smaller natural gas companies.

Chesapeake Energy Corp will continue to manage Barnett Shale, ensuring that oilfield contracts and operations won't change. In addition, Chesapeake, as an operator, is still responsible for meeting any new environmental regulations.

This deal with Total is Chesapeake's fourth deal in 18 months, all with European companies.

Exxon has a protection clause in place that allows the company to opt out of the purchase if hydraulic fracturing, a drilling technique developed in Barnett Shale, is deemed illegal. Lawmakers in Washington are investigating the drilling technique also known as fracking. If they enact a law, it'll protect the water supply from the injection of chemicals in natural gas wells.