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Chesapeake to sell more Haynesville assets as 2016 divestitures hit $2.5B


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Chesapeake to sell more Haynesville assets as 2016 divestitures hit $2.5B

As part of its multibillion-dollar 2016 asset sale campaign, Chesapeake Energy Corp. struck an agreement to divest part of Haynesville Shale properties in northern Louisiana to a Covey Park Energy LLC affiliate for about $465 million.

The assets include 41,500 net acres and 326 operated and nonoperated wells yielding about 50 MMcf/d of gas, according to a Dec. 20 news release. The deal is Chesapeake's second Haynesville asset sale under the divestiture plan, enacted to restore the heavily indebted company's balance sheet.

"We are pleased with the results of our non-core Haynesville sales packages, totaling projected gross proceeds of $915 million, while divesting of only approximately 80 MMcf of daily gas production and approximately $50 million of estimated 2017 operating income," said Doug Lawler, CEO of Chesapeake.

Chesapeake surpassed its $2 billion target for asset sales in 2016 as total gross proceeds from divestitures have reached $2.5 billion, Lawler said. He added that asset sales should continue in 2017.

Analysts at Capital One Securities Inc. and Barclays Capital Inc. viewed the deal as a positive for Chesapeake, saying it is well priced and will slightly lower the company's projected leverage ratios.

The Haynesville divestitures as a whole should "relieve pressure on [Chesapeake's] balance sheet and should improve valuation metrics," Barclays analysts said in a Dec. 20 note. The second sale would draw a favorable response from the market, according to the analysts.

The deal is expected to close in the first quarter of 2017.