SAN RAMON (dpa-AFX) - Oil and natural gas producer Chesapeake Energy Corp. (CHK) agreed Wednesday to sell most of its Permian properties and midstream assets, as well as certain non-core leasehold in three all-cash deals totaling about $6.9 billion.
The deals, which will help Chesapeake cut debt and plug a cash-flow shortfall, is expected to close within the next 30 days. The company intends to use the net proceeds from the sales to fully repay its $4 billion of term loans during the 2012 fourth quarter.
'We are pleased to announce further progress towards our asset sale goals for 2012. The net proceeds of approximately $6.9 billion from the sales discussed today are in addition to the $4.7 billion of sales previously closed in the 2012 first half and will bring our 2012 year-to-date sales to $11.6 billion, or approximately 85% of our full-year goal of $13-14 billion, which we expect to achieve by year end,' Chesapeake CEO Aubrey McClendon said in a statement.
Chesapeake is selling its Permian Basin assets through purchase and sale agreements with three companies totaling $3.3 billion. It is selling the southern Delaware Basin portion of the Permian Basin to a subsidiary of Royal Dutch Shell plc (RDS.B) for about $1.935 billion.
The northern Delaware Basin portion is being sold to Chevron U.S.A. Inc., a subsidiary of Chevron Corp. (CVX), and the Midland Basin portion is being sold to Houston-based EnerVest, Ltd.
The company said it will receive about 87 percent of the cash proceeds at closing of the three Permian Basin deal, while the remaining proceeds are subject to certain contingencies.
As for the midstream assets also Chesapeake has entered into three separate deals and also expects to enter into a fourth, for combined proceeds of about $3 billion. It will sell most of the midstream assets to Global Infrastructure Partners (GIP) for about $2.7 billion as well as sell certain Mid-Continent midstream assets and certain oil gathering assets to two companies for $300 million. These three deals are expected to close in the 2012 third and fourth quarters.
While agreeing to sell its non-core leasehold assets, Chesapeake entered into four separate deals to sell assets in the Ulica Shale for total proceeds of about $600 million.
Oklahoma City-based Chesapeake, second-largest U.S. natural gas producer, has been pressured by the U.S. natural gas prices, which has been at its lowest in the past decade. The company has led the industry in natural gas production growth over the past 10 and five years.
The company has earlier said that it may sell part of its midstream assets by the end of September to help raise cash. It is seeking to sell assets worth as much as $14 billion by year-end and $20.5 billion through next year to bridge a cash-flow shortfall.
According to ratings agency Moody's Investors Service, Chesapeake is required to raise at least $7 billion by selling its assets by the end of the year to avoid a credit downgrade.
Chesapeake's largest shareholders, Southeastern Asset Management, Inc. with a 13.6 percent stake, and Carl Icahn with a 7.6 percent stake, have been pushing for shedding its pipeline assets and other non-core business in order to focus on its core oil and gas drilling assets.
In early June, the two biggest shareholders also managed to replace nearly half of Chesapeake's board to improve governance of the company that has seen a sharp erosion in share value as well as to plug huge funding gaps.
CHK closed Tuesday's regular trading session at $20.10, up $0.29 on a volume of 0.63 million shares. In the past 52-week period, the stock has been trading in a range of $13.32 to $32.07.
Copyright RTT News/dpa-AFX
© 2012 AFX News
