Chesapeake sells $6.9bn in assets

Chesapeake Energy, the second-largest producer of natural gas in the US, has continued its disposal programme with the deals for oilfields and pipelines worth a total of $6.9bn, including sales already announced.

The company, which needs to raise cash to finance its capital spending plans, has sold part of its holdings of Permian Basin oilfields in Texas and New Mexico, seen as some of its most attractive assets, and confirmed the sale of pipeline assets first announced in June.

It will use the proceeds to pay off the $4bn term loan from Goldman Sachs and Jefferies, the investment banks, that it agreed in May after revealing potential problems with the banking covenants for its previous debt facility.

Paying off that term loan before the end of the year is a priority for Chesapeake, because the interest rate will rise sharply if it extends the loan into 2013.

The company expects to receive 87 per cent of the sale proceeds in cash within 30 days.

The price it achieved for the sale of the oilfields is lower than many analysts had expected, but the price for the pipelines is higher than the company had previously indicated.

The Permian fields are being sold for a total of $3.3bn in three pieces: one to Royal Dutch Shell, the Anglo-Dutch oil group, one to Chevronof the US, and one, as Chesapeake had previously indicated, to Enervest, another US company.

The sales represent two-thirds of Chesapeake’s holdings of 1.5m acres in the Permian basin. The company will retain about 470,000 acres “for future sale or development”, it said.

It has also sold oil and gasfields in the Utica shale of Ohio for $600m.

The pipelines are being bought by Global Infrastructure Partners, a private equity fund, which in June bought Chesapeake’s 46.1 per cent stake in Chesapeake Midstream Partners – a separately listed pipeline company which has been renamed Access Midstream Partners – for $2bn.

It is paying a further $2.7bn for additional pipeline assets owned by Chesapeake directly. The sale was announced in June, with a price of about $2bn put on those assets.

Chesapeake also said on Wednesday it was selling other pipeline and storage facilities for a further $300m.

Aubrey McClendon, Chesapeake’s chief executive, said in a statement that the sales were “significant steps in the transformation of our company’s asset base to a more balanced portfolio . . . by focusing on developing and harvesting the value embedded in the 10 core plays in which Chesapeake has built a number one or number two position.”

Mr McClendon stepped down as chairman earlier in the year after concerns were raised about his borrowing against his personal stakes in the company’s wells, but remains chief executive.

The deals bring to about $12bn the total that Chesapeake has raised this year, putting it 85 per cent of the way to its target of $14bn for sales in 2012.

In early trading, Chesapeake’s shares were up 3 per cent at $20.10. They have fallen 34 per cent in the past year.

BY Ed Crooks

Source: http://www.ft.com/intl/cms/s/0/54c29c8c-fcda-11e1-9dd2-00144feabdc0.html#axzz26GVaDTLV