Chesapeake Energy Corp. on Monday clinched a trio of separate oil and natural gas transactions in unconventional fields are to give it total proceeds of $2.6 billion.
In the largest transaction, the Oklahoma City-based driller sold preferred shares in its Cleveland and Tonkawa plays for $1.25 billion. The second, worth an estimated $745 million ($4.68/Mcf), is the completion of the company's 10th volumetric production payment (VPP) for producing assets in the Anadarko Basin's Granite Wash. Chesapeake also agreed to sell its Texoma Woodford properties in Oklahoma to ExxonMobil Corp. subsidiary XTO Energy Inc. for $590 million in cash.
The Texoma Woodford play was "nonstrategic to Chesapeake and we are happy to unlock the value of these assets for our shareholders," said CEO Aubrey K. McClendon. "We plan to monetize other nonstrategic assets during 2012, including our assets in the East Texas Woodbine play, where we own approximately 50,000 net acres of leasehold." In the months ahead, he said the company has other asset monetization transactions planned for expected proceeds of $8-10 billion."
The preferred shares of newly formed subsidiary CHK Cleveland Tonkawa LLC (CHK C-T), as well as a 3.75% overriding royalty interest in the first 1,000 new net wells to be drilled, were sold to an investment group led by GSO Capital Partners LP, an affiliate of the Blackstone Group. CHK C-T owns about 245,000 net leasehold acres in the Cleveland and Tonkawa liquids-rich tight sands plays in Oklahoma's Roger Mills and Ellis counties. The purchasing group included TPG Capital, Magnetar Capital and EIG Global Energy Partners. Chesapeake retained all of the common equity interests in the subsidiary.
An affiliate of Morgan Stanley bought the VPP for producing assets in the Granite Wash, including about 160 Bcfe of proved reserves and 125 MMcfe/d net of current output. Chesapeake retained drilling rights on the properties above and below the currently producing intervals, as well as those outside of the existing producing wellbores. Including this transaction, Chesapeake said it has completed 10 VPP transactions since December 2007 and sold about 1.37 Tcfe of proved reserves for combined proceeds of around $6.4 billion ($4.65/Mcfe), which it said was 300% more than its current drilling and completion costs per Mcfe.
An agreement also was completed with XTO covering about 58,400 net acres of leasehold in the Texoma Woodford play in Oklahoma's Bryan, Carter, Johnston and Marshall counties. The properties include 25 MMcfe/d net of current production. The transaction is set to close by the end of the month.