Chesapeake sells Permian basin and other assets for $6.9 billion
OKLAHOMA CITY -- Chesapeake Energy has unveiled a slew of asset sales, including most of its Permian Basin properties and all of its midstream assets for about $6.9 billion in cash as the natural gas producer continues its push to offset debt and raise money to help it focus on more-profitable oil.
Chesapeake said it will use a part of the proceeds from the asset sales--which are net of expenses--to repay $4 billion in term loans during the fourth quarter.
The company, the second-largest producer of natural gas in the U.S. after Exxon Mobil, has been selling properties in oil and gas fields, reporting in August that its second-quarter earnings rose 91% as it benefited from asset sales that brought more than half a billion to its bottom line. It, like many of its rivals, has been hurt by stubbornly low prices for natural gas amid a production glut.
In August, Chesapeake raised its expected proceeds from asset sales to between $13 billion and $14 billion during the year, up from a minimum of $11.5 billion.
Wednesday, Chesapeake said it will sell the Permian assets to three companies for total net proceeds of about $3.3 billion. It will sell its assets in the southern Delaware Basin portion of the Permian Basin to Royal Dutch Shell and its assets in the northern Delaware Basin part of the Permian Basin to Chevron. It had previously revealed that it would sell its producing assets in the Midland Basin portion of the Permian Basin to Houston-based EnerVest Ltd.
The Permian Basin assets being sold produced about 21,000 bbl of liquids and 90 MMcfd of natural gas per day during the second quarter, which is around 5.7% of Chesapeake's production during the quarter.
The company expects to close all three transactions within the next 30 days and to get about 87% of the proceeds in cash at closing. Chesapeake said it will keep about 470,000 net acres of undeveloped leasehold in the Midland Basin for future sale or development.
In addition, Chesapeake has agreed to sell most of the midstream assets owned by its subsidiary Chesapeake Midstream Development to Global Infrastructure Partners. The assets to be sold to Global Infrastructure include gathering and processing systems in the Eagle Ford, Utica, Haynesville and Powder River Basin Niobrara shale plays.
The energy company said it also expects to enter into an agreement to sell certain oil gathering assets in the Eagle Ford Shale for about $300 million. It sees combined proceeds from all these deals of around $3 billion. The midstream transactions are expected to close in the third and fourth quarters.
Additionally, the company revealed it has sold or will sell noncore leasehold assets in the Utica Shale and other areas for about $600 million, the majority of which has already been received.
In August, the Oklahoma City company revealed that its debt increased 10% in the second quarter to $14.3 billion. However, Chesapeake had said it is still committed to reducing its debt to $9.5 billion by year's end. Shares popped 4.1% to $20.92 in recent premarket trading. The stock has fallen 35% over the past 12 months.
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