Chesapeake sells second Haynesville acreage position for $465M

Chesapeake Energy Corp. (NYSE:CHK) has signed an agreement to sell a portion of the company's acreage and producing properties in its Haynesville Shale operating area in northern Louisiana for approximately $465 million to an affiliate of Covey Park Energy LLC. The sale includes approximately 41,500 net acres and 326 operated and non-operated wells currently producing approximately 50 million cubic feet (MMcf) of gas per day, net to Chesapeake.

Doug Lawler, Chesapeake's CEO, commented, "We are pleased with the results of our non-core Haynesville sales packages, totaling projected gross proceeds of $915 million, while divesting of only approximately 80 MMcf of daily gas production and approximately $50 million of estimated 2017 operating income. Upon closing, this strong bid for our second Haynesville package, along with our recent new issue and tender, will position Chesapeake with significant liquidity as we begin a new year.

"Chesapeake delivered on its strategy and achieved our stated financial and operational objectives in 2016. We exceeded our 2016 asset sales goal by approximately $500 million, bringing total gross proceeds from divestitures either signed or closed in the year to approximately $2.5 billion, excluding certain volumetric production payment repurchase transactions. We will continue to pursue opportunities to strengthen our balance sheet in 2017."

The deal, on the heels of the recent sale of additional Haynesville assets to privately held Indigo, puts total proceeds for the two Haynesville divestitures “toward the high end of the $700 million to $1 billion range that the Street was expecting,” said CapitalOne Securities analyst Phillips Johnston.

In a note Tuesday morning, Johnston said the price, “looks good and the deal should be slightly accretive and mildly compress CHK’s EV/EBITDA multiples (by ~0.1x) and projected leverage ratios (by ~0.2x).”

Johnston detailed the adjusted price as “~$6K/acre, excluding ~$200MM of production value assuming $4K per Mcf/d. We estimate the asset generates ~$28MM of annual EBITDA at our ’17 price deck  of $3/Mcf. Deal metrics thus include ~$9K per flowing Mcfe/d and ~16.5x  EBITDA vs CHK’s standalone multiples of ~$5K per Mcfe/d and 9.0x EBITDA based on ’17.”

Following the two divestitures, Chesapeake retains approximately 250,000 net acres in the core of Haynesville. The company expects this recent transaction to close in the 2017 first quarter.


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