WHEELING - Oklahoma-based Chesapeake Energy is selling the rest of its pipeline network and natural gas transporting equipment located largely in the Marcellus and Utica Shale areas for $2.16 billion as part of its effort to shed assets to pay off debts.
"We look forward to completing additional asset sales and achieving our goals of strengthening our balance sheet, tightening our asset focus and increasing returns to shareholders," said Chesapeake Chief Executive Officer Aubrey McClendon.
Much of the assets Chesapeake will sell are located in the developing natural gas areas of Ohio, West Virginia and Pennsylvania. Other portions are located in Texas, Louisiana and other parts of the United States.
Chesapeake is selling the assets to Access Midstream Partners. Chesapeake formerly owned this company, then known as Chesapeake Midstream Partners, but sold off the midstream group earlier this year.
J. Mike Stice now serves as chief executive officer for Access Midstream, the same capacity in which he served with Chesapeake Midstream.
"The extension of our services into gas processing, fractionation and NGL pipelines will enhance our ability to grow and deliver additional value to our unitholders going forward," Stice said.
In the natural gas industry, companies like Chesapeake Energy, XTO Energy, Chevron and Range Resources are known as producers because they own the gas that is pumped from the ground. "Midstream" assets include pipelines, as well as processing and fractionation plants such as those operated by Dominion Resources, Williams Partners, MarkWest Energy and others which are needed to take the gas to market.
Stice said this deal will allow Access to have gathering opportunities in key liquids-rich regions and to the processing and fractionation segments of the midstream value chain.
The liquids-rich, or "wet," gas is prevalent in eastern Ohio and much of West Virginia's Northern Panhandle. Chesapeake has estimated that these wet wells which produce ethane, propane, butane, pentane and possibly crude oil, in addition to the dry methane are worth at least three times as much as wells that yield only methane.
Estimates earlier this year measured Chesapeake's debt ranging anywhere from $9.5 billion to $22 billion. Much of Chesapeake's financial difficulties result from McClendon's personal business dealings with local Chesapeake leaseholdings, which saw him take a 2.5 percent personal interest in Brooke, Ohio, Marshall and Wetzel County Chesapeake operations. This left some investors concerned because Chesapeake is a publicly traded company, while McClendon's firms, Larchmont Resources and Jamestown Resources, are his own businesses.
Jefferies & Co. and Goldman Sachs are serving as financial advisers to Chesapeake on its midstream transactions. Earlier this year, Chesapeake borrowed $4 billion from Goldman that the driller also is repaying.
Casey Junkins is a staff writer for the The (Wheeling) Intelligencer.