Chesapeake Energy to divest $6.9 billion in assets
Chesapeake Energy Corp. announced multiple agreements to sell most of its Permian properties, substantially all of its midstream assets, and certain noncore leasehold for total net proceeds of $6.9 billion.
The Oklahoma City independent will use part of the sales proceeds to repay $4 billion in term loans during this year’s fourth quarter. Counting the Sept. 12 announcements, Chesapeake’s sales agreements this year total $11.6 billion.
Chesapeake, which has faced financial, governance, and legal questions, seeks to cut its $14.3 billion in long-term debt to $9.5 billion by yearend (OGJ Online, Aug. 13, 2012).
The Permian basin divestitures involve three companies, and Chesapeake expects to receive $3.3 billion in total net proceeds. Assets being sold produce 21,000 b/d of liquids and 90 MMcfd of natural gas. The three transactions are expected to close within 30 days.
SWEPI LP, a unit of Royal Dutch Shell PLC, is buying Chesapeake’s southern Delaware basin portion of the Permian basin.
Chevron USA Inc. is buying Chesapeake’s assets in the northern Delaware basin portion of the Permian basin.
Chesapeake is keeping 470,000 net acres of undeveloped leasehold in the Midland basin for future sale or development.
During June, former ConocoPhillips Director Archie Dunham was named Chesapeake chairman, and the board was restructured. Billionaire Carl Icahn and Southeastern Asset Management control four seats on Chesapeake’s nine-member board (OGJ Online, June 21, 2012).
Midstream assets being sold
Chesapeake is selling substantially all of its midstream assets in three separate transactions and also expects a fourth agreement. Those four deals would result in $3 billion of combined proceeds.
Global Infrastructure Partners (GIP) agreed to buy most of Chesapeake Midstream Development LP’s assets for $2.7 billion.
GIP is buying gathering and processing systems in the Eagle Ford, Utica, Haynesville, and Powder River basin Niobrara shale plays and certain other assets. The transaction with GIP includes one new volume commitment anticipated production in the Haynesville shale during 2013-17.
In addition, Chesapeake has sold or has agreement with two other companies to sell certain Midcontinent midstream assets and also expects to enter into a fourth agreement to sell certain oil gathering assets in the Eagle Ford shale in southern Texas for combined proceeds of $300 million.
The midstream transactions are expected to close on various dates in the third and fourth quarters. Combined with the previous $2 billion sale of limited and general partnership interests in Access Midstream Partners LP (formerly known as Chesapeake Midstream Partners LP), Chesapeake’s total proceeds from its midstream exit will be $5 billion.
Finally, in four separate transactions, Chesapeake has recently sold or entered into purchase and sale agreements to sell noncore leasehold assets in the Utica shale and various other areas for $600 million.
After closings on these transactions, Chesapeake will continue to own 1.3 million net acres of leasehold in the Utica shale.
Contact Paula Dittrick at [email protected].
Paula Dittrick | Senior Staff Writer
Paula Dittrick has covered oil and gas from Houston for more than 20 years. Starting in May 2007, she developed a health, safety, and environment beat for Oil & Gas Journal. Dittrick is familiar with the industry’s financial aspects. She also monitors issues associated with carbon sequestration and renewable energy.
Dittrick joined OGJ in February 2001. Previously, she worked for Dow Jones and United Press International. She began writing about oil and gas as UPI’s West Texas bureau chief during the 1980s. She earned a Bachelor’s of Science degree in journalism from the University of Nebraska in 1974.
