Chesapeake Energy announces sale: Keeping 1.3 mill Utica acres for now

OKLAHOMA CITY, Okla. — Chesapeake Energy Corporation announced Sept. 12 it has entered into multiple agreements to sell the vast majority of its Permian properties, substantially all of its midstream assets and certain non-core leasehold for total net cash proceeds of approximately $6.9 billion.

Utica shale

According to a press release from Chesapeake, following the sales, Chesapeake will be left with approximately 1.3 million net acres of leased land in the Utica shale.

The company will use a portion of the proceeds from these asset sales to fully repay its $4.0 billion of term loans during the 2012 fourth quarter.

In four separate transactions, Chesapeake has recently sold or entered into purchase agreements to sell non-core leasehold assets in the Utica shale and various other areas for approximately $600 million, the majority of which has already been received.

Following these transactions, Chesapeake will continue to own approximately 1.3 million net acres of leasehold in the Utica shale, in which its cost basis, net of various sales and its joint venture with Total, will be approximately $200 per net acre (including all drilling carries in the Total joint venture).

Permian basin

Chesapeake has entered into purchase and sale agreements with three companies covering the vast majority of its Permian basin assets for total net proceeds of approximately $3.3 billion. The Permian basin assets being sold produced approximately 21,000 barrels of liquids and 90 million cubic feet of natural gas per day during the 2012 second quarter, or approximately 5.7% of Chesapeake’s production during the quarter.

Delaware basin

Chesapeake has entered into a purchase and sale agreement to sell its assets in the southern Delaware basin portion of the Permian basin to SWEPI LP, a subsidiary of Royal Dutch Shell . Additionally, Chesapeake has entered into a purchase and sale agreement to sell its assets in the northern Delaware basin portion of the Permian basin to Chevron U.S.A. Inc., a subsidiary of Chevron Corporation.

As previously announced, the company has entered into a purchase and sale agreement to sell its producing assets in the Midland basin portion of the Permian basin to affiliates of EnerVest, Ltd.

Chesapeake is retaining approximately 470,000 net acres of undeveloped leasehold in the Midland basin for future sale or development. Chesapeake expects to close all three transactions within the next 30 days.

In addition, Chesapeake has entered into sale agreements with respect to substantially all of its midstream assets in three separate transactions and also expects to enter into a fourth agreement, which would result in combined proceeds of approximately $3.0 billion.

The company has entered into a letter of intent with Global Infrastructure Partners (GIP) covering most of the midstream assets owned by Chesapeake Midstream Development, L.P., a wholly owned subsidiary of Chesapeake, for expected proceeds of approximately $2.7 billion. The assets to be sold to GIP include gathering and processing systems in the Eagle Ford, Utica, Haynesville and Powder River basin Niobrara shale plays and certain other assets. The transaction with GIP would include new market-based gathering and processing agreements covering certain acreage dedication areas and also include one new volume commitment covering approximately 70% of the company’s expected production volumes in the southern portion of our Haynesville shale area during 2013-17.

In addition, Chesapeake has sold or entered into purchase and sale agreements with two other companies to sell certain MidContinent midstream assets and also expects to enter into a fourth agreement to sell certain oil gathering assets in the Eagle Ford shale for combined proceeds of approximately $300 million.

The midstream transactions are expected to close on various dates in the 2012 third and fourth quarters. When combined with the previous sale of its limited and general partnership interests in Access Midstream Partners, L.P. in June 2012 for approximately $2.0 billion, Chesapeake’s total proceeds from its midstream exit will be approximately $5.0 billion.

Finally, in four separate transactions, Chesapeake has recently sold or entered into purchase and sale agreements to sell non-core leasehold assets in the Utica shale and various other areas for approximately $600 million, the majority of which has already been received.

Following these transactions, Chesapeake will continue to own approximately 1.3 million net acres of leasehold in the Utica Shale, in which its cost basis, net of various sales and its joint venture with Total, will be approximately $200 per net acre (including all drilling carries in the Total joint venture).

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