Chesapeake Energy Corp
) has inked an asset sale deal with
Access Midstream Partners, L.P.
) for its midstream assets, as it tries to narrow cash-flow
shortfall while shifting gears to oil-directed drilling from
natural gas. The transaction is valued at approximately $2.16
ACCESS MIDSTRM (ACMP): Free Stock Analysis
CHESAPEAKE ENGY (CHK): Free Stock Analysis
PLAINS ALL AMER (PAA): Free Stock Analysis
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Per the deal, the natural gas giant intends to sell midstream
properties that are mainly located in its Marcellus, Utica, Eagle
Ford, Haynesville and Niobrara shale plays. The pact -likely to
close by the end of this year - also covers new market-based
gathering and processing agreements, including diverse acreage
Oklahoma City-based Chesapeake remains focused on its asset
monetization initiatives as it is trying hard to minimize capital
expenditure and devolve as much as $14.0 billion worth of assets
this year and an additional $4 billion to $5 billion in 2013.
Recently, the company sold certain midstream assets in Oklahoma
and Texas for approximately $175 million. Additionally, it
expects to complete the divestiture of its remaining midstream
belongings, with Mid-Continent and other assets, by the end of
first quarter 2013 for approximately $425 million.
All these transactions summed up to a total of about $2.75
billion proceeds. Taking into consideration the second as well as
the third quarters' proceeds of approximately $2.75 billion, the
company is expected to collect $4.875 billion from the entire
Meanwhile, Chesapeake also sold certain crude oil and condensate
gathering assets to a pipeline company
Plains All American Pipeline L.P.
) for about $125 million. The properties are positioned in the
Eagle Ford oil and gas formation in South Texas with a storage
capacity of 15,000 barrels and 40 miles of pipelines. It also has
300,000 barrels of storage capacity that are under construction
and a truck unloading terminal.
Given the gas price scenario, Chesapeake intends to deploy more
funds toward liquids. In particular, the company plans to invest
heavily in the development of its holdings in the Eagle Ford
Shale, Granite Wash and Mississippi Lime.
However, we prefer to remain on the sidelines and see the stock
performing in line with the broader market. 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.