Chesapeake's (CHK) and McClendon's Shale Revenue Alternative

The announcement from Chesapeake Energy (CHK) CEO Aubrey McClendon and Kohlberg Kravis Roberts & Co. (KKR) that they are entering a $250 million joint venture received mixed responses from pundits and analysts.

As for the deal, KKR will supply $225 million of the investment while Chesapeake will invest the remaining $25 million.

The purpose of the joint venture is for the two companies to acquire more oil and gas shale plays in order to generate royalties from the properties.

Chesapeake will do the majority of the lifting because of its expertise in the sector; owning and managing the shale assets on behalf of the venture.

With KKR putting up 90 percent of the capital, it has to stand to reason that they will almost assuredly, after some management fees, take in that same amount in royalties.

Aubrey McClendon has an insatiable drive to own more and more shale assets. But with the capital spigot running dry for Chesapeake, he's extending the reach of the company through the joint venture.

KKR director Robert Antablin said this, "Driven predominantly by the recent advancements in unconventional oil and gas technology, we continue to see attractive opportunities to invest behind the domestic exploration and production of oil and gas."

On Chesapeake's part, they must get more access to oil assets because the low price of natural gas has pressured the company's margins and earnings.

In 2011 they spend upwards of $1 billion to make acquisitions to that effect. This venture gives them access to more land and oil assets without having to cough up money it simply no longer has to make the deals it needs for shale oil acreage.

This assumes McClendon isn't blind or foolish enough to buy up even more major gas holdings with the additional capital in his hands.

The market wasn't impressed with the announcement of the joint venture, as many investors and onlookers believe Chesapeake is already in way over its head. They've already sold off some of its properties and made deal with other parterns.

So the idea of pursuing even more acreage doesn't sound too good for those who have watched Chesapeake with consternation as its debt soared and gas prices plummeted.

If this capital isn't used to acquire significant oil assets, it'll be a shock, and the future of Chesapeake would look as bleak as it ever has.

The good news is if they keep focused, Chesapeake is a good at sourcing and managing resources as anyone out there, and lower risk plays like this could help them gain some respectibility and bring back some significant profitability back to the company.

KKR closed at $13.61, down $0.25, or 1.80 percent. Chesapeake ended the session at $23.56, plunging $0.67, or 2.77 percent.