Chesapeake Energy Corp. agreed to sell oil and natural-gas assets for $6.9 billion in a series of transactions that will narrow a cash-flow shortfall threatening to crimp the company’s drilling and production goals.
Chevron Corp., Royal Dutch Shell Plc and EnerVest Ltd. will buy acreage in the Permian Basin of Texas and New Mexico for $3.3 billion, Chesapeake said in a statement today. Closely held Global Infrastructure Partners will by most of Chesapeake’s pipeline and processing assets for $2.7 billion.
The Permian Basin holdings were the most valuable of several assets Chesapeake Chief Executive Officer Aubrey McClendon put up for sale this year to raise cash to avoid a credit-rating downgrade and maintain debt covenants. The company retained 470,000 acres in the Midland Basin, the eastern section of the Permian Basin, which may be sold or developed.
“It’s positive,” Tim Rezvan, an analyst for Sterne, Agee & Leach Inc. in New York who rates the shares at neutral, equivalent to a hold and owns none, said today in a telephone interview. “The Permian Basin figure was lower than we expected, but they haven’t sold everything.”
McClendon said in a March interview that he expected the Permian assets to fetch at least $5 billion. Last month, McClendon told analysts during a conference call that some of the Permian acreage failed to attract bidders and may be remarketed once the current sales agreements close.
The announcement was made before regular trading began on U.S. markets. The shares rose 3.2 percent to $20.75 at 8:43 a.m. in New York. As of yesterday, they had fallen 9.8 percent this year.
Chesapeake has sold or agreed to sell $11.6 billion of assets this year, toward a goal of $13 billion to $14 billion, McClendon said in today’s statement. The Permian divestitures accounted for 5.7 percent of second-quarter output, including 21,000 barrels of oil per day and 90 million cubic feet a day of gas, the company said.
Global Infrastructure’s $2.7 billion purchase includes most of Chesapeake’s pipeline and processing operations, according to the statement. Unnamed companies will buy additional oil gathering pipelines in Texas’ Eagle Ford and the midcontinent region for about $300 million. Global Infrastructure agreed in June to buy Chesapeake’s share of a publicly traded pipeline and processing partnership now called Access Midstream Partners LP.
Chesapeake is also selling acreage in the Utica shale and other areas it doesn’t want to develop for $600 million in four separate transactions, according to the statement.