Chesapeake Energy deals to net $2.6B

Chesapeake Energy Corp. has worked out three deals to monetize its assets for about $2.6 billion in cash, the company announced Monday.
BY JAY F. MARKS jmarks@opubco.com Published: April 10, 2012
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Chesapeake Energy Corp. on Monday announced the first three deals in a series of planned transactions intended to help the company raise up to $10 billion this year.

The deals, which total $2.6 billion, include the sale of more than 58,000 acres in four southern Oklahoma counties.

XTO Energy Inc., a subsidiary of industry giant Exxon Mobil Corp., has agreed to pay $590 million in cash for Chesapeake's holdings in the Texoma Woodford play.

CEO Aubrey K. McClendon said the area in Bryan, Carter, Johnston and Marshall counties is not one of Chesapeake's strategic plays. Current production is about 25 million cubic feet of natural gas a day.

“We are happy to unlock the value in these assets for our shareholders,” he said in a statement Monday.

In the largest of Monday's deals, Chesapeake netted $1.25 billion from the sale of preferred shares in newly formed subsidiary CHK Cleveland Tonkawa LLC to a group of investors.

The group, led by GSO Capital Partners LP, will receive an initial annual distribution of 6 percent each quarter, as well as a 3.75 percent overriding royalty interest in the first 1,000 net wells drilled by the Chesapeake subsidiary in its 245,000 acres leasehold.

The deal also gives Chesapeake the right to repurchase all of the preferred shares before March 31, 2019.

Chesapeake also struck a deal worth about $745 million with an affiliate of Morgan Stanley for the sale of oil and natural gas produced from the company's acreage in the Anadarko Basin Granite Wash in western Oklahoma and the Texas Panhandle over the next decade.

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