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Chesapeake Makes $6.9B Sale to Help Pay Off Debt

September 13, 2012
By CASEY JUNKINS Staff Writer , The Intelligencer / Wheeling News-Register

In the company's ongoing efforts to pay off debt and refocus its efforts on becoming more active in the oil and natural gas liquids business, Chesapeake Energy is selling $6.9 billion in gas and oil fields, pipelines and other gas gathering facilities in Texas and New Mexico.

The Upper Ohio Valley's largest active natural gas driller, Oklahoma City-based Chesapeake took a $4 billion loan from global investment firm Goldman Sachs earlier this year. In addition to repaying this loan, the company wants to fulfill more debt obligations - and focus on "developing and harvesting" the value it finds in areas like Ohio and West Virginia.

"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 and production by focusing on developing and harvesting the value embedded in the 10 core plays in which Chesapeake has built a No. 1 or No. 2 position," said Chief Executive Officer Aubrey McClendon.

Article Photos

Photo by Casey Junkins
As subcontractors working on behalf of Chesapeake Energy continue laying pipelines in West Virginia’s Northern Panhandle and eastern Ohio, the company is selling $6.9 billion worth of assets to help pay off debts.

Included in these "core plays" are Chesapeake's operations in the Marcellus and Utica shale formations, with much of this area in Ohio and West Virginia containing the natural gas liquids - ethane, propane, butane and pentane - in addition to the dry methane. Chesapeake recently noted that these wet gas wells can be worth about three times as much as the wells that yield only the dry methane gas.

Chesapeake and other companies have paid Upper Ohio Valley mineral owners anywhere from $5 per acre to at least $5,000 per acre. The company also took over many $5 per acre lease agreements from Range Resources in West Virginia's Northern Panhandle. Chesapeake officials rushed to drill wells on this land so the company could hold the acreage for this price before the leases expired, which would have required the company to pay more higher prices to the mineral owners.

In addition to the debt issues, earlier this year, investors and industry leaders began questioning McClendon's practice of taking a personal stake in local drilling operations. Via firms such as Jamestown Resources and Larchmont Resources, McClendon took a 2.5 percent stake in Chesapeake's wells in Ohio, Marshall, Wetzel and Brooke counties, including those on property leased by the city of Wheeling, the Wheeling Park Commission and the Ohio County Commission.

Chesapeake is a publicly owned company traded on the New York Stock Exchange. Conversely, Jamestown and Larchmont are privately held by McClendon.

McClendon later agreed to end this practice by June 30, 2014 - and to relinquish his chairmanship of the company.

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