October 8, 2024

DealBook: Chesapeake Energy to Sell Assets for $6.9 Billion

A Chesapeake Energy storage tank, near Dilley, Tex.Pat Sullivan/Associated PressA Chesapeake Energy storage tank near Dilley, Tex.

The Chesapeake Energy Corporation said on Wednesday that it had agreed to a series of asset sales, including the majority of its holdings in the Permian Basin. The move will raise $6.9 billion as it seeks to repay some of its considerable debt burden.

The sales are part of the drilling company’s efforts to repay money borrowed to cover enormous expected revenue shortfalls. This year, the company has reached agreements to sell $11.6 billion worth of properties. It is aiming to raise a total of about $13 billion to $14 billion.

The transactions announced on Wednesday include the sale of $3.3 billion worth of holdings in the Permian Basin, which straddles the Texas-New Mexico border, to Royal Dutch Shell, Chevron and EnerVest L.P. Collectively, the properties represented 5.7 percent of Chesapeake’s production of oil and natural gas in the second quarter, representing 21,000 barrels of liquids and 90 million cubic feet of natural gas a day.

Chesapeake also agreed to sell virtually all of its midstream assets, including pipelines and some processing facilities, in a series of transactions that would raise about $3 billion. The bulk of the assets will be sold to Global Infrastructure Partners for $2.7 billion, which had agreed in June to buy other Chesapeake midstream properties. Another transaction will generate about $300 million.

And the company also agreed to four separate deals to sell holdings in the Utica Shale, in the Northeast, that would raise about $600 million. Chesapeake will continue to own 1.3 million net acres in the area.

Proceeds from the transactions will go toward paying down $4 billion in term loans, as Chesapeake seeks to pay for its shift away from low-priced natural gas and to more profitable oil drilling.

“We are pleased to announce further progress toward our asset sale goals for 2012,” Aubrey K. McClendon, Chesapeake’s co-founder and chief executive, said in a statement. “These transactions are significant steps in the transformation of our company’s asset base to a more balanced portfolio among oil, natural gas liquids and natural gas resources and production.”

The company had been battered earlier this year by revelations about an unusual compensation scheme that had been set up for Mr. McClendon. The disclosures had compounded existing investor frustration about an expensive business strategy that had yet to bear significant fruit, leading Mr. McClendon to relinquish his chairman role.

Chesapeake was advised by the Jefferies Group and Goldman Sachs.

Article source: http://dealbook.nytimes.com/2012/09/12/chesapeake-to-sell-assets-for-6-9-billion/?partner=rss&emc=rss

DealBook: Sinopec and Total Continue Shale Gas Buying Spree

A site where Chesapeake Energy is drilling near Big Wells, Texas.Michael Stravato for The New York TimesA site where Chesapeake Energy is drilling near Big Wells, Tex.

Deal-making in the shale gas sector, one of the hottest last year, is off to a strong start in 2012, with two foreign companies buying big stakes in operations in the United States.

The French oil giant Total announced plans on Monday to buy a piece of the Chesapeake Energy Corporation’s shale operation in Ohio for $2.32 billion. Hours later on Tuesday, Sinopec International Petroleum Exploration and Production agreed to buy a 30 percent stake in five Devon Energy shale operations for about $2.2 billion.

Under the terms of Chesapeake joint venture, Total will take a 25 percent interest in a 619,000-acre parcel of the Utica Shale in eastern Ohio. The deal is Total’s second partnership with Chesapeake, the most active natural gas driller in the United States.

Chesapeake could use the cash to reduce long-term debt. The company has promised to reduce its debt by as much as 25 percent.

“We believe that the Utica Shale is a world-class asset with world-class returns, and now we have a world-class partner to help develop the play more aggressively than we could have with our own resources,” Aubrey K. McClendon, Chesapeake’s chief executive, said in a statement.

Chesapeake has sold stakes in a number of assets in recent years as it has sought to raise cash for development, and the company has promised billions more in asset sales and joint ventures this year. In 2011, Chesapeake sold shale assets in northern Arkansas to BHP Billiton for $4.75 billion.

Sinopec will pay Devon $900 million in cash and up to $1.2 billion in future drilling costs in exchange for a one-third interest in five shale operations, including in the Utica Shale, as well as for petroleum deposits in Louisiana, Oklahoma, Michigan, Colorado and Wyoming. Through the end of the year, Devon said it expected to drill 125 wells in the five locations.

“This arrangement improves Devon’s capital efficiency by recovering our land and drilling costs to date and by significantly reducing our future capital commitments,” John Richels, Devon’s president and chief executive, said in a statement.

Shale formations — sedimentary rock from which hard-to-recover natural gas and oil can be extracted using the drilling technique known as hydraulic fracturing, or fracking — have been active deal-making targets. But fracking has come under fire from environmental advocates and politicians, who have raised concerns about the safety of the drilling method.

Kohlberg Kravis Roberts sold assets in the Eagle Ford Shale formation to Marathon Oil for $3.5 billion in June, while that same month Progress Energy Resources sold a stake of similar size in its British Columbia venture to Petronas of Malaysia for about $1.1. billion. In March, Sasol bought a 50 percent stake in shale assets owned by Talisman Energy.

Chesapeake was advised by Jefferies Company on the transaction.

Article source: http://feeds.nytimes.com/click.phdo?i=b0c52a4160ddff093c658ca14aff7309