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.
The volumetric production payment equals about $4.68 per thousand cubic feet of natural gas equivalent.
The transaction includes about 160 billion cubic feet of natural gas proved reserves and current production of an estimated 125 million cubic feet a day.
The Morgan Stanley affiliate deal is Chesapeake's 10th such transaction since 2007, with the company selling about 1.37 trillion cubic feet of proved gas reserves for about $6.4 billion. That equals about $4.65 per thousand cubic feet, or more than three times Chesapeake's current drilling and completion costs.
Chesapeake intends to complete transactions up to $10 billion this year.
“We plan to monetize other nonstrategic assets during 2012, including our assets in the East Texas Woodbine play where we own approximately 50,000 net acres of leasehold,” McClendon said.
The company is raising money to fund its anticipated 2012 capital expenditures and provide additional cash for 2013, according to the financial plan detailed in February.