Chesapeake to Raise $4B Via Trio of Pipeline Sales

By Matt Egan Features FOXBusiness


In an effort to raise cash amid mounting debt, Chesapeake Energy (CHK) announced plans on Friday to unload its midstream pipeline assets in a trio of deals expected to raise more than $4 billion.

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The embattled Oklahoma City-based natural gas producer said the divestitures will enable it to slash previously-budgeted capital expenditures by about $3 billion over the next three years.

Chesapeake said it plans to sell its limited partner units and general partner interest in Chesapeake Midstream Partners (CHKM) to Global Infrastructure Partners for $2 billion. Chesapeake, which pegged the net book value of these assets as of the end of the first quarter at about $1 billion, said it plans to report a pretax gain of about $1 billion on this sale.

At the same time, Chesapeake said it has entered into a letter agreement with Chesapeake Midstream Partners over the potential sale of certain assets. It similarly reached a letter agreement with Global Infrastructure Partners over the sale of another subsidiary, Chesapeake Midstream Development.

These two complex transactions should net Chesapeake Energy more than $2 billion, the company said.

Billionaire activist investor Carl Icahn had pressured Chesapeake to sell pipeline assets to reduce costs and raise cash. The company faces an estimated $22 billion cash-flow shortfall and has also been hit by slumping natural gas prices and corporate-governance scandals.

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“We have been working for the past few months to monetize our substantial and valuable midstream assets,” Chesapeake CEO Aubrey McClendon said in a statement.

McClendon said the proceeds of these transactions will bolster its 2012 asset sales program, which is on pace to generate cash proceeds of $11.5 billion to $14 billion. Already this year Chesapeake has raised $6.6 billion from asset sales.

Shares of Chesapeake Energy fell 1.01% to $17.67 Friday morning, extending its 2012 decline to nearly 21%. On the other hand, Chesapeake Midstream Partners saw its shares rise 1.48% to $25.44.