OKLAHOMA CITY – Chesapeake Energy Corp. on Tuesday announced a $2 billion purchase that executives said would make the company “better, not just bigger.”
In exchange for $2 billion in cash and 9.44 million common shares, Chesapeake acquired from Chief E&D Holdings LP and affiliates of Tug Hill Inc. “high-quality production assets and inventory of ‘premium drilling locations in the prolific Marcellus Shale in northeastern Pennsylvania’.
Agreement Increases Chesapeake’s Marcellus Position by 25%, Extends Drilling Inventory to Over 15 Years at Current Activity Levels, and Increases Marcellus Shale’s Pro Forma Production Capacity to 200 Million Cubic Feet of natural gas per day.
Chesapeake also announced that it has sold its Powder River Basin assets in Wyoming to Continental Resources Inc., also based in Oklahoma City, for about $450 million in cash.
the FinancialTimes described the deal as reflecting a consolidation trend in the US shale play as the sector emerges from the oil crash. The transaction also rebalances Chesapeake’s portfolio toward natural gas.
Chesapeake’s statement says the deal adjusts the company’s portfolio to generate 75% of projected cash flow in 2022 from natural gas assets and 25% from oil assets.
The agreement marks Continental’s second reach in the Powder River Basin. Continental entered the Powder River Basin market in March 2021 by purchasing assets from Tulsa-based Samson Resources as Samson prepared to dissolve.
The purchase of approximately 172,000 net Chesapeake acres brings Continental to approximately 500,000 net acres in the Powder River Basin. The sale includes 350 operating wells and 17 permits in southeast Wyoming. Powder River Basin volumes in the fourth quarter of 2021 are expected to average approximately 19,000 barrels of oil equivalent per day, or approximately 58% crude oil and natural gas liquids.
Both transactions are expected to close by the end of the first quarter of 2022. Net proceeds from the sale of assets to Continental will go towards the purchase price of the Chief acquisition, Chesapeake said.
Nick Dell’Osso, president and CEO of Chesapeake, said the transactions bolster the company’s efforts to streamline and restructure after emerging from bankruptcy in February 2021.
“In less than a year, we have achieved our goal of refocusing and adding value to our portfolio around our core assets, positioning us to generate meaningful returns for shareholders today while embracing low energy generation. carbon emissions for tomorrow,” Dell’Osso said.
“Upon closing of these transactions, Chesapeake will benefit from a high-quality portfolio focused on three premier U.S. hydrocarbon basins – Marcellus, Haynesville and Eagle Ford,” Dell’Osso said. “By combining the rock and scale of these premium assets, with our disciplined capital investment strategy and a narrower, more logical focus, we are better positioned to enhance returns and create lasting value for our shareholders. .”
Dell’Osso assumed leadership of Chesapeake in October 2021, following the departure of Doug Lawler, who had led the company since founder Aubrey McClendon resigned in 2013.
Lawler assumes his new role as chief operating officer and executive vice president of Continental effective February 1, 2022.
Chesapeake’s Nasdaq price rose 5.29% on Tuesday, closing at $67.13.
Continental’s stock price on the New York Stock Exchange rose 9.02% on Tuesday, closing at $53.78.