Chesapeake Energy Corp. is moving closer to its goal of selling up to $14 billion worth of assets this year.
The Oklahoma City oil and natural gas company on Wednesday announced deals worth about $6.9 billion, including the sale of most of its midstream assets and a large portion of its holdings in the oil-rich Permian Basin in west Texas and New Mexico.
Chesapeake CEO Aubrey McClendon said the deals bring Chesapeake's 2012 asset sales to about $11.6 billion, or about 85 percent of its stated goal for the year. The company is seeking to raise as much as $14 billion this year to offset an expected budget shortfall.
“These transactions are significant steps in the transformation of our company's asset base to a more balanced portfolio among oil, natural gas liquids and natural gas resources and production by focusing on developing and harvesting the value embedded in the 10 core plays in which Chesapeake has built a No. 1 or No. 2 position,” McClendon said in a news release.
News of the sales failed to impress investors, as Chesapeake's stock dipped 21 cents on Wednesday. It closed at $19.89 a share.
Argus Research analyst Phil Weiss said the sales are not enough to raise his confidence in Chesapeake, which has been beset with questions about McClendon's personal finances and allegations of collusion with competitor Encana Corp. in a 2010 Michigan land sale, but they should improve the company's financial situation.
“It does move them a little higher up the walls in the hole they've been trying to climb out of,” Weiss said.
Chesapeake is facing budget shortfalls estimated at as much as $22 billion by the end of 2013 as it aims to diversify its operations by reducing its focus on natural gas. A portion of the proceeds from Wednesday's sales will be used to repay a $4 billion unsecured loan from Goldman Sachs Bank USA and Jefferies Group Inc. during the fourth quarter.
Chesapeake's holdings in the Permian Basin had been identified as one of the plum assets it had offered for sale.
Three companies, including industry giants Royal Dutch Shell and Chevron Corp., will pay about $3.3 billion for acreage that produced about 21,000 barrels of liquids and 90 million cubic feet of natural gas a day during the second quarter.
That price is well below earlier estimates of as much as $6 billion for the Permian sale, although Chesapeake will retain about 470,000 net acres for future sale or development.
“I attribute the shortfall to the buyers' awareness of CHK's situation more than anything else,” Weiss said.
Chesapeake also is selling midstream assets in deals expected to net about $3 billion.
Global Infrastructure Partners — which bought Chesapeake's stake in former pipeline subsidiary Access Midstream Partners LP for $2 billion in July — will pay an additional $2.7 billion for more of Chesapeake's pipeline holdings, with three other midstream deals expected to net Chesapeake another $300 million.
The other sales announced Wednesday are four transactions involving noncore acreage in Ohio's Utica Shale and various other areas. Chesapeake will earn about $600 million on those deals.
McClendon acknowledged the deals could result in some employees leaving Chesapeake.
“We very much appreciate the skill, effort and dedication of our midstream and Permian employees over the years, and we look forward to their continued success as they are either reassigned inside Chesapeake or pursue new opportunities with the buyers of our assets or elsewhere in the industry,” McClendon said.