Chesapeake Energy Corp. closed its 2013 funding gap Wednesday by working out a $1 billion deal to sell some of its holdings in Louisiana and south Texas to Dallas-based EXCO Resources Inc.
“Today's announcement brings our year-to-date asset sales signed or closed to approximately $3.6 billion, which, combined with forecast net operating cash flow, enables Chesapeake to fully fund its 2013 capital expenditure budget,” CEO Doug Lawler said Wednesday in a news release.
Chesapeake's stock rose 9 cents in limited trading Wednesday, closing at $21.01 a share.
EXCO will pay $680 million for about 55,000 acres in south Texas' Eagle Ford Shale and $320 million for about 9,600 acres in Louisiana's Haynesville Shale.
Chesapeake will get about 90 percent of that money up front when the deal closes.
Sterne Agee analyst Tim Rezvan said it was another “underwhelming” sale for Chesapeake, but the Oklahoma City-based company reached its asset sale target without sacrificing much of its production stream.
He noted the assets Chesapeake is selling accounted for less than 4 percent of its first-quarter production.
“This sale was a large, long-awaited component of the company's stated $4 billion low-end target this year,” Rezvan wrote in a note for clients, but he added that Chesapeake still needs to worry about 2014.
Rezvan estimated Chesapeake could be facing a $2.9 billion funding shortfall next year, although Lawler, who took Chesapeake's CEO post last month, has not announced the company's growth strategy for 2014.
Chesapeake, which had said it would sell as much as $7 billion in assets this year, has not ruled out future deals.
“Additional asset sales contemplated for later this year may reduce long-term debt and further enhance our financial liquidity,” Lawler said.
Chesapeake acknowledged in its first-quarter earnings release in May that it was trying to sell some of its Eagle Ford acreage. The oil-rich Eagle Ford is one of Chesapeake's most lucrative operating areas, but the acreage being sold is outside its core development area.
Chesapeake is devoting about 35 percent of this year's capital expenditure budget to its Eagle Ford operations. The company drilled 91 wells there in the first quarter, bringing its total to 887.
The Eagle Ford yielded 75,000 barrels of oil a day for Chesapeake in the quarter, up more than 200 percent over the same period of 2012, according to the company's latest investor presentation, which was posted July 1.
Chesapeake said it had about 3,500 drilling locations in the Eagle Ford, although its presentation does not include the company's total acreage in the play.
The Sterne Agee note indicates Chesapeake is selling about 11 percent of its acreage in the play.
EXCO said there are about 300 identified drilling locations in the 55,000 acres it is acquiring from Chesapeake, along with 120 producing wells responsible for about 6,100 barrels of oil a day in May.
The Haynesville acquisition allowed EXCO to add to its core position in the natural gas-rich play, CEO Douglas H. Miller said.