Natural gas giant
Chesapeake Energy Corporation
(
CHK
) has wrapped up its asset sale deal with private equity firm
Global Infrastructure Partners ("GIP"). Under the deal, Chesapeake
sold its pipeline properties for a total cash consideration of $2
billion.
Last month, Chesapeake, the second largest natural gas producer
in the U.S., proposed to sell its interests in
Chesapeake Midstream Partners LP
(
CHKM
) to GIP, as part of the three-tier asset sale pact. The closure of
the asset sale deal allows GIP to own all of the general partner
interests and 69% of the limited partner units of Chesapeake
Midstream.
Chesapeake is also in the process of disposing certain
Mid-Continent gathering and processing assets to Chesapeake
Midstream Partners. Again, in the other tranche of the pact, the
Oklahoma City-based company will sell its stakes in a subsidiary -
Chesapeake Midstream Development LP
- for an extra $2 billion to GIP. Importantly, the total
divestiture will allow Chesapeake to shed its earlier announced
capital expenditure by $3 billion over the next three years.
The company sold Chesapeake Midstream properties comprising
pipeline networks in Texas, Louisiana, Pennsylvania and other
gas-producing states. As of March 31, 2012, it had 3,953 miles of
pipeline. About 75% of the partnership's revenue is generated from
Chesapeake Energy, while the balance comes from
Total SA
(
TOT
) and
Statoil ASA
(
STO
).
Of late, Chesapeake has been in the news as it is under pressure
to fund its capital budget amid diminishing cash flows on the back
of falling natural gas prices. The company intends to offload as
much as $11.5 billion to $14.0 billion worth of assets this year in
order to bridge the funding gap of $9 billion to $10 billion.
Chesapeake holds a Zacks #3 Rank, which is equivalent to a Hold
rating for a period of one to three months. We maintain our
long-term Neutral recommendation for the company.
CHESAPEAKE ENGY (CHK): Free Stock Analysis
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