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Chesapeake sells assets to repay part of debt
Source: Agencies |
September 13, 2012, Thursday
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CHESAPEAKE Energy Corp is selling US$6.9 billion of gas fields and pipelines in a move to repay part of the troubled company's massive debt load and to fund this year's operations.
The company is selling most of its assets in the Permian Basin to Royal Dutch Shell Plc and Chevron Corp, and nearly all of its remaining infrastructure network.
Chesapeake has been selling assets this year to meet an estimated US$10 billion funding gap. It plans to use some of the proceeds from yesterday's announcement to trim its US$14.33 billion debt load by US$4 billion. The company's market value is roughly US$13.37 billion.
The company sold its pipeline network for more than analysts had expected, but got less for its Permian assets than expected, Argus Research analyst Phil Weiss said.
"Is this a fire sale? Maybe, maybe not. But it's certainly less than (Chesapeake) would have liked us to think previously," Weiss said. "When you look at the acquirers - Chevron and Shell - I certainly wouldn't expect them to overpay."
The company holds 1.5 million acres in the Permian Basin, a vast source of oil and natural gas in the western part of Texas and the southeastern part of New Mexico.
Chesapeake's Permian sales work out to about US$3,200 per acre, less than half the US$7,500-an-acre average that sellers in the Permian had reaped in 10 previous sales during 2011 and 2012, said Morningstar analyst Mark Hanson.
Given the quality of Chesapeake's assets in the Permian, though, Hanson had expected a price of around US$3,750 an acre.
The deal is part of the company's strategy to shift away from cheap natural gas into more lucrative crude oil.
The company is selling most of its assets in the Permian Basin to Royal Dutch Shell Plc and Chevron Corp, and nearly all of its remaining infrastructure network.
Chesapeake has been selling assets this year to meet an estimated US$10 billion funding gap. It plans to use some of the proceeds from yesterday's announcement to trim its US$14.33 billion debt load by US$4 billion. The company's market value is roughly US$13.37 billion.
The company sold its pipeline network for more than analysts had expected, but got less for its Permian assets than expected, Argus Research analyst Phil Weiss said.
"Is this a fire sale? Maybe, maybe not. But it's certainly less than (Chesapeake) would have liked us to think previously," Weiss said. "When you look at the acquirers - Chevron and Shell - I certainly wouldn't expect them to overpay."
The company holds 1.5 million acres in the Permian Basin, a vast source of oil and natural gas in the western part of Texas and the southeastern part of New Mexico.
Chesapeake's Permian sales work out to about US$3,200 per acre, less than half the US$7,500-an-acre average that sellers in the Permian had reaped in 10 previous sales during 2011 and 2012, said Morningstar analyst Mark Hanson.
Given the quality of Chesapeake's assets in the Permian, though, Hanson had expected a price of around US$3,750 an acre.
The deal is part of the company's strategy to shift away from cheap natural gas into more lucrative crude oil.
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