Chesapeake Energy Corp. Announces Plan to Sell Its Midstream Assets in Three Transactions for Total Expected Cash Proceeds of...
08 June 2012 - 9:54PM
Business Wire
Chesapeake Energy Corporation (NYSE:CHK) today announced plans
to sell its midstream assets in three separate transactions for
total expected cash proceeds of more than $4.0 billion. The
midstream divestitures will also enable Chesapeake to reduce
previously budgeted capital expenditures by approximately $3.0
billion over the next three years.
Chesapeake has agreed to sell its limited partner units and its
general partner interests in Chesapeake Midstream Partners, L.P.
(NYSE:CHKM) to Global Infrastructure Partners (GIP) for cash
proceeds of $2.0 billion. Chesapeake expects to receive the first
half of the proceeds on June 15, 2012 with a final closing and
payment of the second half of the proceeds scheduled to occur by
June 29, 2012. Chesapeake’s net book value for these assets as of
March 31, 2012 was approximately $1.0 billion, and the company
anticipates reporting a pretax gain on the sale of approximately
$1.0 billion.
Chesapeake has also entered into a letter agreement with CHKM
relating to the potential sale of certain Mid-Continent gathering
and processing assets to CHKM and a separate letter agreement with
GIP for the sale of the company’s interests in its wholly owned
subsidiary, Chesapeake Midstream Development, L.P. (CMD) to GIP.
Chesapeake expects total cash proceeds of more than $2.0 billion
from these two transactions. The company’s net book value for these
assets as of March 31, 2012 was approximately $1.4 billion. The GIP
letter agreement includes a 45-day exclusive negotiation period and
a 45-day extension period if a purchase price has been agreed to
and progress is being made toward closing.
Aubrey K. McClendon, Chesapeake’s Chief Executive Officer,
commented, “We have been working for the past few months to
monetize our substantial and valuable midstream assets and are
pleased to announce the sale of our investments in CHKM and a plan
to sell our remaining midstream assets at attractive prices. These
transactions will preserve the strategic relationships we have with
CHKM and CMD as our primary midstream service providers and further
strengthen the close relationship we have enjoyed with GIP since
2009. The proceeds of these transactions are an important part of
our 2012 asset sales program that is on track to generate cash
proceeds of $11.5-14.0 billion. Combined with the $2.6 billion of
proceeds generated to date in 2012 from asset sales, this series of
midstream transactions will bring our announced asset sales for the
year up to approximately $6.6 billion. With our Permian asset sale,
Mississippi Lime JV and other miscellaneous asset sales still to
come in the second half of the year, we feel very good about our
ability to meet our targeted range for 2012 asset sales.
Importantly, the sale of CMD will also reduce previously planned
capital expenditures by approximately $3.0 billion over the next
three years. We greatly appreciate the hard work and dedication of
our midstream employees as they have contributed to building one of
the largest and highest quality midstream businesses in the
industry. We look forward to the continued success of our midstream
businesses under the leadership of its existing midstream
management team and GIP’s new ownership.”
J. Mike Stice, CHKM’s Chief Executive Officer and CMD’s
President, commented, “This is a new beginning for both CHKM and
CMD and an opportunity to explore additional growth opportunities
from a solid foundation provided by CHK as our anchor shipper. We
have built a very talented and profitable organization, and I am
very excited about the future of our independent midstream
businesses. We believe our unique combination of contractual,
organic and dropdown growth is unmatched in the midstream
industry.”
Adebayo Ogunlesi, GIP’s Managing Partner, commented, “We have
enjoyed a mutually beneficial partnership with Chesapeake over the
past three years, and we look forward to continuing to provide
Chesapeake with high quality midstream services while expanding
these offerings to other producers requiring similar services. The
management team and employees at CHKM have proven to be very
capable and highly customer focused, and we are confident this
business will continue to be successful and grow profitably in the
years ahead.”
Chesapeake Energy Corporation (NYSE:CHK) is the
second-largest producer of natural gas, a Top 15 producer of oil
and natural gas liquids and the most active driller of new wells in
the U.S. Headquartered in Oklahoma City, the company's
operations are focused on discovering and developing unconventional
natural gas and oil fields onshore in the U.S. Chesapeake
owns leading positions in the Marcellus, Haynesville, Bossier, and
Barnett natural gas shale plays and in the Eagle Ford, Utica,
Mississippi Lime, Granite Wash, Cleveland, Tonkawa, Niobrara, Bone
Spring, Avalon, Wolfcamp and Wolfberry unconventional liquids
plays. The company has also vertically integrated its
operations and owns substantial marketing, midstream and oilfield
services businesses directly and indirectly through its
subsidiaries Chesapeake Energy Marketing, Inc., Chesapeake
Midstream Development, L.P. and Chesapeake Oilfield Services,
L.L.C. and its affiliate Chesapeake Midstream Partners, L.P.
(NYSE:CHKM). Further information is available at
www.chk.com where Chesapeake routinely posts
announcements, updates, events, investor information, presentations
and news releases.
This news release includes "forward-looking statements" that
give Chesapeake's current expectations or forecasts of future
events. These statements include the completion of the sale of
limited partner units and general partner interests in Chesapeake
Midstream Partners, L.P. (NYSE:CHKM) and the potential sale of
Mid-Continent gathering and processing assets and Chesapeake’s
wholly owned subsidiary, Chesapeake Midstream Development, L.P.
Although we believe the expectations and forecasts reflected in
our forward-looking statements are reasonable, we can give no
assurance they will prove to have been correct. They can be
affected by inaccurate assumptions or by known or unknown risks and
uncertainties, and actual results may differ from the expectation
expressed. The terms of the transactions covered by the letter
agreements are subject to negotiation and may not be completed in
the time frame anticipated or at all. We caution you not to
place undue reliance on our forward-looking statements, which speak
only as of the date of this news release, and we undertake no
obligation to update this information.
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