Chesapeake Energy Selling $1 Billion in Assets to EXCO

Andrew Klips |

In its latest move to close a gap between planned capital expenditures and cash flow, Chesapeake Energy Corp. (CHK) said Wednesday that it is selling assets in the Northern Eagle Ford Shale and Haynesville Shale to EXCO Operating Company, LP, a division of EXCO Resources, Inc. (XCO) to an aggregate amount of about $1 billion.

Oklahoma City-based Chesapeake expects to receive about $900 million at the closing, anticipated to happen in July.

Dallas-based EXCO has agreed to buy approximately 55,000 net acres with about 120 producing wells and net daily production of about 6,1000 barrels of oil equivalent in the Northern Ford Shale. The wells and land are located in Zavala, Dimmit, La Salle and Frio counties in Texas.

Additionally, EXCO is acquiring Chesapeake's operated and non-operated interests in approximately 9,600 net acres in the Haynesville Shale area in Louisiana. These assets include 11 units operated by Chesapeake and 42 units operated by EXCO that together produced about 114 million cubic feet of natural gas equivalent in May.

"Today's announcement brings our year-to-date asset sales signed or closed to approximately $3.6 billion, which, combined with forecasted net operating cash flow, enables Chesapeake to fully fund its 2013 capital expenditure budget," said Doug Lawler, chief executive at Chesapeake. Lawler added that any additional asset sales this year could be used to reduce long-term debt and strengthen the company's financial liquidity.

With the transaction, Chesapeake, the U.S.'s second biggest natural gas producer behind Exxon Mobil Corp. (XOM), has nearly reached its goal of raising at least $4 billion in 2013 to improve its cash position.

"These acquisitions are consistent with our strategy of targeting opportunities in both existing core areas and new plays," said Douglas H. Miller, EXCO's chairman and chief executive.

EXCO has secured financing from JP Morgan (JPM) in which an existing credit agreement will be replaced with a new one that has an initial $1.6 billion borrowing base.

Shares of CHK are edging ahead in Wednesday trading with the news, up by almost 1 percent at $21.08, their third straight day of gains, should they hold. Shares are ahead by about 27 percent so far in 2013.

Shares of XCO are also climbing in morning action, rising 1.4 percent to $7.58. So far this year, shares are ahead by about 13 percent.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
XCO EXCO Resources Inc. Exco Resources Inc. 1.07 0.02 1.90 1,460,324
XOM Exxon Mobil Corporation 88.32 0.25 0.28 9,086,715
CHK Chesapeake Energy Corporation 7.60 0.02 0.26 72,009,796
PCRX Pacira Pharmaceuticals Inc. 33.20 0.85 2.63 876,356

Comments

Emerging Growth

Breathtec BioMedical Inc.

Breathtec Biomedical Inc is a medical diagnostics company. It is engaged in developing & commercializing breath analysis devices for the early detection of infections & life threatening diseases including cancers,…

Private Markets

Wealthfront

Wealthfront is an automated investment service that serves as an alternative to traditional financial advisory services. The company manages a diversified, continually rebalanced portfolio of index funds on their clients’…

8tracks

Our mission is to be the best place for people who care about music to create and discover thoughtfully curated playlists. In essence, 8tracks is a platform for online mixtapes.