Chesapeake Energy Corporation (NYSE: CHK) announced that, as part of its 2011-12 strategic and financial “25/25 Plan,” the company has decided to sell all of its Fayetteville Shale assets, as well as its equity investments in Frac Tech Holdings, LLC and Chaparral Energy, Inc. If these sales are completed, Chesapeake anticipates that the combined pre-tax proceeds could exceed $5.0 billion.
In the Fayetteville Shale, the company is the second-largest producer of natural gas with current net production of approximately 415 million cubic feet of natural gas equivalent production per day (Mmcfe/d) and owns approximately 487,000 net acres of leasehold. Chesapeake owns 25.8% of Frac Tech and 20.0% of Chaparral.
In light of Chesapeake’s plan to reduce its long-term debt by 25% in 2011-12, the company plans to use the net proceeds from these sales and its previously announced Niobrara joint venture to retire approximately $2.0 - $3.0 billion of its shorter-dated senior notes and to also reduce borrowings under its revolving bank credit facility. The amount of senior notes retired will depend in part on Chesapeake’s ability to acquire its senior notes in the market or through tender offers.
Aubrey K. McClendon, Chesapeake’s chief executive officer, commented, "We have received strong positive feedback from a number of our investors with respect to the announcement of our 25/25 Plan in early January and last week’s announcement of our $1.3 billion Niobrara joint venture with an affiliate of CNOOC Limited (NYSE: CEO). We believe the three proposed asset sales announced today and the Niobrara joint venture are all likely to be completed in the first half of 2011 and will provide us with strong momentum into the second half of 2011 as we move forward in executing our plan."
Recommended Reading
Ecopetrol in Discussions with Oxy to Buy $3.6B Stake in CrownRock
2024-07-19 - Occidental Petroleum is in talks with joint venture partner Ecopetrol SA to acquire a 30% stake in CrownRock LP for approximately $3.6 billion, according to regulatory filings.
Analysis: A Mountain of Asset Sales Loom After Oil Megamerger Era
2024-06-26 - U.S. oil and gas companies could face an uphill struggle to sell about $27 billion of assets to fund investor payouts over the next few years as the biggest wave of energy megamergers in 25 years nears the end of regulatory reviews.
IOG Resources Acquires Interests from Civitas
2024-05-06 - IOG Resources acquired interests in the Denver-Julesburg Basin from Civitas Resources.
Oxy Near $1B Deal to Sell Barilla Draw to Permian Resources— Sources
2024-07-25 - Occidental Petroleum and Permian Resources are in the process of finalizing the Permian Basin deal, which could be announced in the coming weeks if the talks don't fall apart, sources told Reuters.
California Resources Wraps $1.1B Deal, Becomes State’s Top Oil Producer
2024-07-01 - California Resources Corp.’s deal to acquire Aera Energy for more than $2 billion, including debt, makes it the state’s largest oil producer at 146,000 boe/d, 79% oil, the company said.