Chesapeake selling Haynesville shale assets for US$450 million

08 December 2016, Week 48, Issue 437

Oklahoma City-based Chesapeake Energy is selling part of its Haynesville shale assets in Louisiana as part of the company’s ongoing push to shore up its balance sheet.

On December 5, Chesapeake said it would sell part of its acreage in the Haynesville for US$450 million to a private buyer later identified by media as US gas producer Indigo Minerals. Chesapeake, the second largest natural gas producer in the US, said the sale included 78,000 net acres (316 square km) and 250 wells with output of 30 mmcf (849,600 cubic metres) per day of natural gas. 

The deal, which is slated to close early next year, is part of an asset sale plan aimed at reducing Chesapeake’s nearly US$9 billion worth of debt. The Haynesville announcement saw Chesapeake’s stock rise 5% in morning trading to a near three-month high. 

In a statement, Chesapeake’s CEO, Doug Lawler, said another Haynesville asset sale was on the horizon.

“We are pleased to announce the first of two proposed Haynesville asset sales for US$450 million,” he said. “With this proposed transaction and our previously announced Devonian asset divestiture, the company has reached approximately US$2 billion gross proceeds from divestitures either signed or closed in 2016.”

Lawler added that the company was aiming to reduce its debt by up to US$3 billion in the long term. 

Chesapeake is one of the companies hit hard by low oil and gas prices. In January, Standard & Poor’s downgraded Chesapeake’s credit rating, calling the company’s debt levels unsustainable. A month later, trading of the company’s stock was stopped after shares dropped more than 50% on concerns that it was on the brink of bankruptcy. 

However, Chesapeake has since bounced back thanks to asset sales and other measures to reduce its debt load. On December 6, Chesapeake tapped debt markets for this first time in over two years, in a move the Financial Times said illustrated a renewed appetite for oil and gas assets.

The company is planning to hold on to around 250,000 acres (1,012 square km) in the Haynesville. Chesapeake expects its Haynesville production to grow by 13% in 2017.

 

Edited by

Anna Kachkova

Editor

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