As a part of its broader strategy to sell assets worth $7 billion this year to strengthen its balance sheet, Chesapeake Energy Corp. (NYSE: CHK) announced on Wednesday that it will sell part of its assets (Eagle Ford and Haynesville Shales) to Exco Resources Inc. (NYSE: XCO) for $1 billion. The move will bring much needed cash at a time when Chesapeake just like any other gas and energy company is reeling under pressure due to low prices amid supply glut. The deal is expected to close by end of this month.
According to Reuters, Global Hunter Securities’ analysts Mike Kelly believes that asset sales would help the company to bolster its balance sheet and by 2014 it would no more rely on further asset sales program.
So far, the total amount of asset sales deals signed or closed, including its deal with Exco stands at $3.6 billion, a data provided Reuters showed.
Chesapeake Chief Executive, Doug Lawler said that the proceeds from asset sales will help the company to fund its capital expenditures worth $7.6 billion in the current year.
Lawyer took over the Company’s reigns from its co-founder Aubrey McClendon, a Charismatic personality who employed a very aggressive strategy to increase exposure in U.S. shale basins. McClendon was however ousted as it was alleged that he misused his position to gain personal mileage from funds that were supposedly meant for the Company, resulting in investigations.
According to the deal, Exco Resources will buy 55,000 acres in Eagle Ford Shale, Texas. The reservoir had a production capacity of 6,100 barrels per oil equivalent per day in May.
Average daily output from its assets in Haynesville was 114 million cubic feet of natural gas equivalent in May.
Jefferies & Co advised Chesapeake over the deal.
Shares of Exco Resources rallied 8.20% to $8.05 on Wednesday.
Exco Resources is independent oil and Natural Gas Company, engaged in the exploration, development and production of onshore oil and natural gas properties in the United States.
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