By Kristin Jones
Chesapeake Energy Corp. (CHK) plans to sell midstream assets in
three separate transactions totaling more than $4 billion in cash,
as the embattled natural-gas company struggles against mounting
debt.
The natural-gas company said it expects the divestitures to
reduce previously budgeted capital expenses by around $3 billion
over the next three years.
Global Infrastructure Partners LLC has agreed to buy limited
partner units and general partner interests in Chesapeake Midstream
Partners L.P. (CHKM) for $2 billion. Chesapeake expects to receive
the first half of the proceeds on June 15, and a final payment by
June 29. The net book value for these assets as of March 31 was
around $1 billion, and the company expects to report a pretax gain
of roughly the same amount.
Chesapeake also agreed to the potential sale of certain
mid-continent gathering and processing assets to Chesapeake
Midstream Partners. At the same time, it agreed to sell the
company's interests in its wholly-owned subsidiary Chesapeake
Midstream Development L.P. to Global Infrastructure Partners.
For these two transactions, Chesapeake expects total cash
proceeds of more than $2 billion. The net book value of the assets
was around $1.4 billion as of March 31. The agreement with Global
Infrastructure Partners includes a 45-day exclusive negotiation
period, with a possible 45-day extension.
"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 [Chesapeake Midstream
Partners] and a plan to sell our remaining midstream assets at
attractive prices," said Chief Executive Aubrey K. McClendon, who
is also the company's founder. "These transactions will preserve
the strategic relationships we have with [Chesapeake Midstream
Partners] and [Chesapeake Midstream Development] as our primary
midstream service providers and further strengthen the close
relationship we have enjoyed with [Global Infrastructure Partners]
since 2009."
The deals will bring Chesapeake's disclosed asset sales of the
year to $6.6 billion, and McClendon said the company expects to
meet its targeted range for 2012 asset sales.
Under pressure from shareholders, Chesapeake is expected to
replace more than half of its board with new directors, limiting
the power of McClendon. The company's controversial founder has led
Chesapeake on a massive expansion in recent years, as the company
acquired drilling rights to a territory three times the size of New
Jersey and became the nation's second-largest natural-gas producer.
McClendon's appetite for risk and corporate governance has come
under attack in recent weeks, and Chesapeake's largest shareholders
have criticized the company for spending billions of dollars more
than it takes in from natural-gas and oil sales.
Shares were up 1.4% in premarket trading to $18.10. The stock is
down 20% so far this year.
Write to Kristin Jones at kristin.jones@dowjones.com