Chesapeake announces sale of midstream assets, lease rights
By Burton Speakman
Chesapeake Energy Corp. will sell nearly all its midstream operations and some oil and gas lease rights in the Utica Shale as part of $6.9 billion in agreements.
The company announced the sale Wednesday, and it includes agreements with multiple companies. In addition to the midstream assets, Chesapeake also is selling the vast majority of its holdings within the Permian Basin and gas leases within the Utica Shale.
Midstream operations is the gathering system that collects wet natural gas from the wellheads and transports it to a gas-processing plant.
Part of the sale proceeds will be used to repay $4 billion in term loans during the fourth quarter of 2012, according to a Chesapeake release.
Pete Kenworthy, manager of media relations for Chesapeake in Canton, said the company would confine its comments to what was in the press release.
Global Infrastructure Partners, an infrastructure investment fund founded by Credit Suisse and General Electric Company, is buying the Utica midstream gathering and processing systems along with those in the Eagle Ford, Haynesville and Powder River Basin Niobrara shales for $2.7 billion.
Chesapeake recently has sold or entered into purchase and sale agreements to sell lease assets in the Utica Shale and various other areas for another $600 million.
After these transactions, Chesapeake still will own about 1.3 million net acres of oil and gas rights in the Utica Shale.
At this point it does not appear Chesapeake will be selling Mahoning Valley leases. Chesapeake has a significant number of oil and gas leases in Columbiana, Trumbull and Mahoning counties.
Both Craig Brown, recorder for Columbiana County, and Diana Marchese, recorder for Trumbull County, reported they have not had any leases recently sold by Chesapeake. Neither had heard about any significant transfers upcoming.
Records from the Mahoning County recorder’s office also did not contain any lease sales by Chesapeake within the county.
The Chesapeake sale should not have an impact on the overall oil and gas operations within the Utica Shale, said Terry Fleming, executive director of the Ohio Petroleum Council.
“These companies are purchasing these assets because they think they’re a good investment,” he said.
There were a few announcements at the Youngstown, Ohio, Utica and Natural Gas Conference and Expo about sizable pipeline projects being planned in Ohio, Fleming said.
“It doesn’t really matter who’s doing the production,” he said. “It’s still all very positive news.”
There are have been additional sales of assets by Chesapeake this year. The company announced in June at a shareholder’s meeting that it would sell $4 billion in assets. Biju Perincheril, an analyst at Jeffries & Co., had estimated at the time Chesapeake needed to sell at least $7 billion worth of assets this year or risk violating the terms of some of its loans.
Despite selling the assets, Chesapeake has continued to purchase oil and gas leases in the Mahoning Valley. In February the company bought deep mineral rights to 28,000 acres for about $35 million, according to a filing with the U.S. Securities and Exchange Commission.
The company has also received the oil and gas rights for more than 50 properties in Mahoning County since July 1, according to records from the Mahoning County Recorder’s office.