Chesapeake Ropes Bronco Drilling

Chesapeake Ropes Bronco Drilling

Friday, April 15, 2011
Chesapeake Energy Corp.

Chesapeake and Bronco Drilling have entered into a definitive agreement for Chesapeake to acquire Bronco for approximately $315 million, including debt, net working capital and outstanding warrants.

Under the agreement, Chesapeake will make a cash tender offer to acquire all outstanding shares of Bronco's common stock at a price of $11.00 per share. The $11.00 per share purchase price represents premiums of 6% and 24% over the closing price of Bronco's common stock on the NASDAQ on April 14, 2011 (the date of signing of the definitive agreement) and the average closing price for the 90-calendar day period ending on April 14, 2011, respectively.

The transaction has been unanimously approved by the Boards of Directors of both companies. The Board of Directors of Bronco unanimously recommends that Bronco's shareholders accept the Chesapeake offer. Third Avenue Management LLC, on behalf of its investment advisory clients, and Inmobiliaria Carso, S.A. de C.V., which are Bronco's largest shareholders and collectively own or have dispositive authority over approximately 32% of Bronco's outstanding common stock, have committed to tender all their shares into the Chesapeake offer.

The acquisition will enable Chesapeake to further its goal of owning approximately two-thirds of the rigs that it operates in its drilling program - a key aspect of its vertical integration strategy - at an attractive price per rig. Bronco currently owns 22 high-quality drilling rigs primarily operating in the Williston and Anadarko basins, including three that are under contract with Chesapeake. Chesapeake is currently Bronco's second largest customer.

Following the closing of the transaction, Chesapeake will integrate Bronco's 22 rigs into Chesapeake's wholly owned subsidiary, Nomac Drilling, L.L.C., which currently owns 95 drilling rigs available for service, of which 90 are currently drilling under contract for Chesapeake. The company is currently operating a total of 160 drilling rigs and plans to end 2012 utilizing approximately 200 drilling rigs. Chesapeake believes that the acquisition of Bronco should satisfy the vast majority of Chesapeake's anticipated rig investment needs through 2012.

Aubrey K. McClendon, Chesapeake's CEO, stated, "We have known and admired Bronco's management team and assets for years and we are especially pleased to announce this transaction today. The acquisition of Bronco is a great additional step in our vertical integration strategy and increases confidence in our plan to ramp up drilling activities in highly lucrative, liquids-rich unconventional resource plays. We look forward to working with Bronco's management team to quickly complete this transaction and integrate operations."

D. Frank Harrison, Bronco's Chairman and CEO, stated, "We are excited about this transaction with Chesapeake, one of the premiere and most innovative energy companies in the world. Chesapeake's visionary and people-centric approach is highly admired. We view this as a great opportunity and in the best interests of Bronco, our shareholders and our employees."

The definitive agreement entered into by Chesapeake and Bronco provides for Chesapeake to acquire Bronco in a two-step transaction. The first step will consist of a cash tender offer to be made by a wholly owned subsidiary of Chesapeake for all outstanding shares of Bronco common stock at a price of $11.00 per share in cash. In the second step, the tender offer will be followed by a merger in which the holders of the outstanding shares of Bronco common stock not purchased in the tender offer will receive the same per share price paid in the tender offer, in cash, without interest. Upon completion of the transaction, Bronco will become an indirect wholly owned subsidiary of Chesapeake. The tender offer will be conditioned upon a majority of the outstanding shares of Bronco common stock being tendered into the offer and will also be subject to regulatory clearances and other customary terms and conditions.

Chesapeake is expected to launch the tender offer shortly and the transaction is expected to close in the second quarter of 2011, subject to customary closing conditions. The transaction is not subject to or conditioned upon financing arrangements.

Johnson Rice & Company L.L.C. is acting as financial adviser to Bronco and has delivered a fairness opinion to its board of directors. Thompson & Knight is acting as legal counsel to Bronco. Jefferies & Company, Inc. is acting as financial adviser to Chesapeake. Commercial Law Group, P.C. and Wachtell, Lipton, Rosen & Katz are acting as legal advisers to Chesapeake.

Lankhorst Ropes Invests in Fiber Rope Test Machine

Tuesday, March 22, 2011
by  Karen Boman

Deepwater rope manufacturer Lankhorst Ropes Offshore Division has invested Euro 2M (US $2.8 million) in a synthetic fiber rope test machine that, for the first time, will enable naval architects to run 'what if' scenarios to simulate the effects of storms and hurricanes on deepwater mooring lines.

Located at Lankhorst Ropes' fiber rope production facility in Portugal, the rope test machine will be used to test the mechanical performance and fatigue behavior for a range of new materials and rope constructions for deepwater mooring and single point mooring (SPM) systems.

The machine can test 65 foot (20 m) ropes with loads up to 1,200 tonnes and a stroke length up to 14.7 feet (4.5 m). In addition, the machine features a precise mechanical control system designed to maintain peak load such that target loads can be maintained within 10kN during testing.

Optimized Mooring Line Installation

Given industry concerns about the rising cost of performing deepwater installations, the test machine is expected to have wider benefits in optimizing installation scenarios. Deepwater ropes are routinely loaded to approx. 40% of MBL [minimum breaking load] to pre-stretch the rope during installation. More accurate information on the degree of pre-loading required will avoid the high cost and safety issues surrounding excessive pre-loading during offshore installation.

"Until now the lack of specialized rope test equipment, and the very high cost of testing, has led to a shortage of authoritative data on rope properties for a variety of fiber types and rope constructions. The Lankhorst fiber rope test machine will fill this knowledge gap, enabling 'what if scenarios that show the effects of storms, hurricanes and loop current events with associated vortex induced vibrations on deepwater mooring lines," says Chris Johnson, sales director, Lankhorst Ropes Offshore Division.

The rope test machine is currently being used to provide test data for a Joint Industry Project (JIP) on Polyester Rope Stiffness Modeling, Testing and Analysis. Chevron, the Bureau of Ocean Energy Management, Regulation and Enforcement, Shell, Petrobras, SBM, Whitehill Manufacturing and Lankhorst Ropes are participants in the JIP.

The actual test results will be confidential for three years after the termination of the JIP, which will occur next month. However, the principles established will be written into the next version of the ABS Rules for Polyester Mooring scheduled for April/May of this year.

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