OKLAHOMA CITY (AP) - Chesapeake Energy Corp. is selling the vast portion of its land and infrastructure in west Texas for nearly $7 billion as the company tries to strengthen its finances while shifting its focus to oil drilling, rather than natural gas.
The assets in the oil and gas-rich Permian Basin are being sold in a series of deals to Royal Dutch Shell PLC, and Chevron Corp., and in a previously announced sale to affiliates of EnerVest Ltd.
Chesapeake accumulated an enormous debt load in recent years as it rushed to acquire land and other assets. New technology allowed drillers to access to enormous reserves of natural gas held in shale and other formations under several states.
Chesapeake and other drillers found and developed so much new natural gas that the price collapsed, decimating profits - and the ability to pay down debt.
The Oklahoma City company is trying to wipe $14 billion in debt off its books this year and the sale, announced Wednesday, brings it close to achieving that goal, the company said. Assets sales now total $11.6 billion for the year.
"These transactions are significant steps in the transformation of our company's asset base to a more balanced portfolio among oil, natural gas liquids and natural gas resources," said CEO Aubrey McClendon.
Analysts said Chesapeake received what appears to be a very good price for its infrastructure assets. But they said the $3.3 billion price for the Permian Basin land assets sold to Chevron and Shell was less than the $4 billion to $5 billion Chesapeake had expected to fetch.
Chesapeake also plans to sell most of its pipeline and storage assets to Global Infrastructure Partners for about $2.7 billion. That includes gathering and processing systems in the Eagle Ford, Utica, Haynesville and Powder River Basin Niobrara shale plays. Chesapeake says it has also sold or entered into additional deals to sell pipelines and other assets that are expected to generate proceeds of about $300 million. Other deals in the Utica Shale should bring in about $600 million. Once the transactions close, Chesapeake will still own about 1.3 million net acres of leasehold in the Utica Shale, which includes lands in eastern Ohio