BHP Billiton has finally secured a substantial acquisition, albeit much smaller than a string of failed deals attempted by the company over recent years.
The world's biggest miner has agreed to pay $4.75 billion to buy shale gas interests in the United States from Chesapeake Energy Corp.
BHP Billiton is acquiring Chesapeake's holdings in the Fayetteville shale natural gas field in Arkansas.
It says the deal should have no problems with competition or investment regulators, such as those which scuttled its proposed Potash takeover in Canada and Rio Tinto iron ore merger in Australia.
BHP says it is hoping to triple production from the field after the acquisition is completed.
CLSA's resources analyst Hayden Bairstow told Reuters that it looks like BHP got a good price for its purchase.
"While people are moving into shale, it's an early stage technology. The asset grab might happen at some stage, but the price BHP is paying shows the market's not yet hot," he said.
"You need to be able to weather low prices for a few years. Obviously someone the size of BHP can do that."
The $4.75 billion pricetag for 75 per cent of the Fayetteville shale natural gas field is a lot less than the $1.9 billion BP paid Chesapeake for a 25 per cent stake in the same field in 2008.
The lower price may have been accepted because Chesapeake is looking to reduce its $15 billion long-term debt load, which contrasts with BHP's $16 billion in cash reserves.
"It's opportunistic, there's no doubt about that," Mr Bairstow added.
BHP shares rose more than 3 per cent in early trade following the announcement, but were only 1.6 per cent higher at $46.58 by the close.
Ric Ronge, a portfolio manager at Pengana Capital, says investors are happy the miner has finally found a use for some of its excess cash.
"BHP have had four multi-billion deals which have tipped over, so the market should be pleased that this is one that is going to go through and it is a change of direction in terms of looking at their petroleum division," he told Reuters.
The company's shares have also benefited from the announcement of a $5 billion off-market share buy-back to complement its on-market buy back that commenced late last year.
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