January 31, 2011 / 5:11 PM / in 7 years

UPDATE 1-Chesapeake shares higher after CNOOC deal

* Shares up 5.8 percent

* Analysts see per acre price dropping (Adds analyst comment; updates share activity)

HOUSTON, Jan 31 (Reuters) - The shares of Chesapeake Energy Corp (CHK.N) rose nearly 6 percent on Monday on news the U.S. natural gas company struck a $1.3 billion shale deal with Chinese oil producer CNOOC Ltd (0883.HK).

On Sunday, Chesapeake said it sold a stake in an oil-rich shale deposit located in parts of Wyoming and Colorado to CNOOC, its second such deal with the Chinese company in about four months [ID:nN30170001].

The deal in the Niobrara shale fields will allow Chesapeake, which has struggled to generate cash because of weak natural gas prices, to fund its drilling program and boost its output of liquids.

Analysts said Chesapeake seemed to be pushing hard for such partnerships to avoid issuing new shares or debt and noted the new joint venture, its sixth such partnership, appeared to be generating less cash than previous deals.

    “The deal is the smallest both in terms of total proceeds and dollars per acre,” Daniel Pratt, an analyst with Ticonderoga Securities said in a note to investors.

    Chesapeake shares were up 5.8 percent at $28.92 in midday trading on the New York Stock Exchange. (Reporting by Anna Driver and Matt Daily in New York; editing by Lisa Von Ahn and Andre Grenon)

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