Oklahoma-based Chesapeake Energy announced on Thursday that it is selling its Utica Shale position in Ohio for $2 billion, in a move to reduce the company’s debt, Kallanish Energy reports.
The buyer is Encino Acquisitions Partners, a private oil and gas company with headquarters in Houston.
The assets being sold include 900,000 acres in eastern Ohio, plus 920 operated and non-operated horizontal wells that produced an average of 107,000 BOE per day.
Those wells produced 67% natural gas, 24% natural gas liquids and 9% oil. They produce about 600 million cubic feet of gas equivalent per day.
Chesapeake said about 322,000 acres in the prime Utica commercial window for drilling.
It said the proved oil and gas reserves in the Utica Shale, as of Dec. 31, 2017, were about 480 million BOE (72% natural gas, 23% NGLs and 5% oil).
Chesapeake said it is selling its total acreage in Ohio.
It had purchased significant tracts in eastern Ohio, starting in 2010 under then-Chesapeake CEO Aubrey McClendon, who died in 2016.
The deal is expected to close in fourth quarter 2018.
The announcement “makes Chesapeake a stronger and more competitive company,” said president and CEO Doug Lawler in a statement.
“By divesting our position in the Utica and using the proceeds for debt reduction, we will not only significantly improve the health of our balance sheet, but we will also accelerate progress toward our strategic goals of reducing our debt, improving our margins and reaching sustainable free cash flow,” he said.
He said the Utica was the best company asset to sell and that leaves Chesapeake with five strong assets for future growth, Lawler said.
The deal was his biggest transaction in three years at the reins of Chesapeake, the third largest gas producer in the U.S.
Encino is a 2017 creation of the Canada Pension Plan Investment Board and a Houston-based management team led by Hardy Murchison.
The pension board plans to invest $1 billion into the partnership and own 98 percent of it, according to a separate statement.
“At EAP, Encino and CPPIB are building a company focused on shareholder returns with top-notch people, carefully managed risk and sustainable, safe operations,” said Hardy Murchison, Encino’s CEO, in a statement.
He added, “With a multi-decade inventory of development projects held by 920 producing wells, the Utica acquisition provides an excellent start for EAP. We are excited to work with Chesapeake’s employees in the Utica and all other stakeholders in the state of Ohio. With a strong balance sheet and a partner of CPPIB's stature, EAP is well positioned for continued growth through drilling and acquisitions.”
“We are pleased to support EAP’s acquisition of these highly attractive Utica Shale assets, which provides CPPIB with meaningful exposure to a leading North American natural gas play and aligns with the growing focus on energy transition,” said Avik Dey, managing director, Head of Energy & Resources, CPPIB, in a statement.
He added, “This transaction represents a unique opportunity to acquire a foundational asset that has a large inventory of wells with a well-established production history and will be managed by Encino, whose management has deep operational and development expertise in the Appalachian region.
“Through EAP, we are continuing to efficiently expand our energy and resources portfolio in key U.S. energy markets as we seek to further diversify the CPP Fund. We look forward to building on our ongoing partnership with Encino to pursue high-quality energy assets in the lower 48 states,” he said.
Chesapeake said it expects to apply $1.9 billion in initial closing proceeds toward debt reduction.
The purchase price includes a $100 million contingent payment based on future natural gas prices.
The deal provides up to $180 million reduction in annual interest expense, the company s id.
The deal provides a reduction of $450 million that Chesapeake would have spent on gathering, processing and transportation for an expected improvement of 50 cents per barrel of oil equivalent.
It also eliminates all future Utica midstream and downstream commitments of about $2.4 billion, Chesapeake said.
It improves Chesapeake’s EBITDA by about 70 cents per BOE in 2019, due to lower cash operating costs and improved oil differentials, assuming flat 2018 commodity prices, the company said.
It said it expects organic replacement of divested EBITDA within one year, driven primarily by oil volume growth in the Powder River Basin in Wyoming.
Chesapeake reported that it expects its 2019 oil production volume to grow by 10% from 2018, adjusted for asset sales, with additional oil growth anticipated in 2020.
https://www.shaledirectories.com/blog/chesapeake-energy-to-sell-utica-assets-in-ohio-for-2b/
No comments:
Post a Comment