Wednesday, September 12, 2012

Chesapeake Sells Most Permian and Midstream Assets

Chesapeake Energy announced today that it has reached agreements to sell most of its holdings in the Permian Basin, representing around one million net acres, to three buyers in separate transactions.  Chesapeake will retain around 470,000 net acres of undeveloped leasehold in the Midland Basin area to either develop in the future or sell (I wonder which it will be...).  The announced price for these transactions is around $3.3 billion, which is less than the $6 billion figure that had been tossed around earlier in the year.

The southern Delaware Basin assets will be sold to SWEPI, LP (Shell), the northern Delaware Basin assets will go to Chevron, USA and the Midland Basin assets will go to EnerVest, Ltd.   The company also noted four other transactions for "non-core" assets in the Utica Shale, but it retains the vast majority of its acreage there.

Chesapeake also announced multiple deals to sell almost all of its remaining midstream assets with another smaller deal for the rest expected to come soon.  With that, Chesapeake's formerly vaunted vertical integration business model will be kaput.

File under, "You've Got To Do What You've Got To Do."


Anonymous said...

I wonder if their selling price for the gas will change for the better once they sell CEMI.

Robert Hutchinson said...

Unsure, but I have my doubts.

One complaint from analysts was the significant forward quantity commitments that CHK made in selling the midstream assets. As far as I know they haven't publicized any information about any discounts to market prices or the like, but given that the assets sold for more than analysts expected, I'd be willing to suggest that CHK may have given the buyers a pretty good deal in exchange for more cash upfront.

Unfortunately, if that is true (and it's only my speculation), that would not benefit the company long-term, nor would it benefit the royalty owners.