Intent on gas

and

have signed a Letter of Intent for a joint venture whereby BP will acquire a 25 per cent interest in Chesapeake's Fayetteville Shale assets for $1.9bn (£1.05bn).

Located in Arkansas, the assets have current daily net production of approximately 180 million cubic feet of natural gas equivalent and include approximately 540,000 net acres of leasehold that the companies believe could support the drilling of up to 6,700 horizontal wells.

As a result of the transaction, BP will own approximately 135,000 net acres of this leasehold with Chesapeake owning approximately 405,000 net acres.

BP will pay $1.1bn in cash at closing and will pay a further $800m during the remainder of 2008 and in 2009 by funding 100 per cent of Chesapeake's 75 per cent share of drilling and completion expenditures, until the $800m obligation has been funded.

Chesapeake plans to continue acquiring leasehold in the Fayetteville Shale play. BP will have the right to a 25 per cent participation in any such additional leasehold.