Oklahoma City-based Chesapeake Energy Corp. on Tuesday revealed it has sold its Canadian subsidiary, with approximately 175 Bcfe of proved reserves, to an unnamed “large Canadian energy producer,” for $150 million. It expects to record a pre-tax gain of about $35 million in the fourth quarter as a result of the transaction.

“Although we have enjoyed a profitable four-year presence in Canada, we have elected to sell our Canadian assets because they are presently valued at levels near Mid-Continent gas assets, yet yield a much lower gas price and therefore, significantly less cash flow per Mcfe of production,” said CEO Aubrey K. McClendon. “All reserves are not created equal, and we feel at that the present time, owning Mid-Continent reserves creates far more value than owning Canadian reserves.” The Canadian reserves and associated acreage and facilities are located in the Helmet area of northeastern British Columbia.

McClendon noted that the sale’s proceeds will reduce the company’s debt, which is currently $165 million under a $225 million facility. He said the sale also would help the company “continue strengthening our position in the Mid-Continent.”

Chesapeake also confirmed that except for positions that have matured according to their terms, it has not lifted any of its forward oil and gas risk management positions. So far this year, Chesapeake has realized gains of approximately $43 million from settling matured positions. As of Sept. 28, its remaining positions covering 42 Bcfe in 2001, 145 Bcfe in 2002 and 88 Bcfe in 2003 “have a market-to-market value of approximately $240 million.” Chesapeake said it could lift some or all of the open positions in the future if market conditions prevail.

Chesapeake’s board of directors also has authorized the repurchase of up to $50 million of its common stock, subject to formal approval from its bank lending group. The stock repurchases may be made in the open market or through privately negotiated transactions. Its repurchase program may begin or be suspended or terminated at any time without any notice, it said. In the past year, Chesapeake’s stock has been as high as $11.06 and as low as $4.50. It closed on Tuesday at $5.59, down slightly from Monday.

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