Chesapeake Energy Corp. said Monday it will sell its stakes in a major natural-gas field and two private energy companies in hopes of reducing its debt by as much as $3 billion.
The divestitures, expected to net $5 billion before tax, are part of a continuing push at the Oklahoma City energy producer to trim its long-term debt by 25 percent over the next two years while boosting its oil and gas output by 25 percent. The company likely will spend some of the proceeds in its ambitious drilling program.
The announcement, in which Chesapeake said it will sell all of its assets in Arkansas’ Fayetteville shale formation, underscores the top U.S. natural-gas producer’s shift away from natural gas to more lucrative oil exploration.
An aggressive deal-maker and buyer of oil and gas properties, Chesapeake has drawn criticism for its heavy spending.
Chesapeake reported long-term net debt of $11.44 billion Sept. 30, down from about $12.3 billion a year earlier. Some analysts calculate the company’s debt ratio to be three times that of its closest competitors. Chesapeake expects that the asset sales declared Monday will allow it to retire between $2 billion and $3 billion of debt and reduce borrowing from its revolving credit lines.
Besides the Fayetteville divestiture, the plans announced Monday call for the sale of minority positions in oil-field-service company Frac Tech Holding LLC and Oklahoma City oil and gas producer Chaparral Energy Inc.
Chesapeake Energy last week announced that Cnooc, China’s largest offshore energy producer, had agreed to pay $570 million in cash for a one-third stake in the company’s Niobrara shale project in Colorado and Wyoming. That deal is expected to speed drilling and job growth in the region, potentially adding up to 1,600 direct jobs and a larger number of support jobs.
