Chesapeake Sells Midstream
Purchase of midstream assets in Marcellus, Utica, Eagle Ford, Haynesville and Niobrara shale plays.
Chesapeake Energy Corp. (NYSE: CHK) plans to sell the majority of its remaining midstream assets to Access Midstream Partners LP (NYSE: ACMP) for about $2.16 billion in cash.
These midstream assets are located primarily in Marcellus, Utica, Eagle Ford, Haynesville and Niobrara shale plays. The transaction includes new market-based gathering and processing agreements and is expected to close by year-end.
In addition to the deal with Access, Chesapeake has recently completed the sale of other midstream assets in Oklahoma and Texas during the 2012 fourth quarter for approximately $175 million.
Chesapeake announced it expects to sell off the remaining of its midstream assets before first-quarter 2013 for about $425 million. Chesapeake expects the total current and expected midstream asset sales to reach around $2.75 billion.
Chesapeake said it expects to collect $4.875 billion when all of the planned and completed midstream asset sales are complete.
Jefferies & Co. Inc. and Goldman, Sachs & Co. are serving as financial advisors to Chesapeake on its midstream transactions. Oklahoma City-based Chesapeake is the second-largest producer of natural gas in the U.S.
The deal makes Access the largest gathering and processing company in the U.S. Separately, Access and Chesapeake have agreed to extend Access’ exclusivity period with respect to Chesapeake’s remaining assets in the Midcontinent until March 1, 2013.
Access was formerly known as Chesapeake Midstream Partners LP and changed its name to Access Midstream Partners LP in July 2012. The midstream company was founded in 2008 and is headquartered in Oklahoma City.
J. Mike Stice, Access Midstream Partners’ chief executive, said, “The acquisition of these midstream assets is a transformational opportunity for Access. Following this transaction, Access will become the largest gathering and processing MLP as measured by invested capital and throughput volume and will have a substantially diversified portfolio with a critical midstream position in the most prominent liquids-rich basins in the United States. The extension of our services into gas processing, fractionation and NGL pipelines will enhance our ability to grow and deliver additional value to our unitholders going forward.”
Access management said the deal will give it large-scale, well-established footprints in virtually all of the major unconventional basins in the United States. The acquisition also provides immediate entry to gathering opportunities in key liquids-rich regions and to the processing and fractionation segments of the midstream value chain.
Access said the acquired assets are anchored by long-term, market-based, cost of service agreements with Chesapeake and other producer customers, which give the company highly predictable cash flows.
Separate from the sale of Chesapeake’s midstream assets, New York-based private equity firm Global Infrastructure Partners LP plans to sell 50% of the general partner and its interest in Access to Williams Companies Inc. (NYSE: WMB) for $1.82 billion in cash.
Following the transaction, GIP’s second fund, Global Infrastructure Partners II, will continue to control 50% of the general partner and a substantial number of Access units.
GIP and Williams have agreed to purchase up to $1.16 billion in equity securities to support the transaction, including $350 million of pay-in-kind equity securities.
Citigroup, Barclays and UBS Investment Bank have provided commitments for a $1 billion acquisition bridge facility. Access received financial advice from Barclays and Citi. Williams received financial advice from Tudor, Pickering, Holt & Co. Securities Inc., and legal advice from Richards, Layton & Finger. Citi acted as exclusive financial advisor to GIP in connection with the sale of its GIP I interests to Williams.