U.S. gas giant
Chesapeake Energy Corp.
) intends to sell off an aggregate of 437 compression units and
related assets in two separate deals worth about $520 million in
an effort to taper its massive gap. Both transactions are likely
to close before the end of the second quarter of 2014.
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The Oklahoma City-based company's subsidiary, MidCon Compression,
L.L.C., will sell 334 compression units, with a combined capacity
of about 440,000 horsepower, to
Exterran Partners, L.P.
). This transaction will raise funds of about $360 million. The
units service gathering systems in Arkansas, Louisiana, Oklahoma,
Texas and Wyoming.
Chesapeake will also sell 103 compression units, with a combined
capacity of around 200,000 horsepower, to
Access Midstream Partners, L.P.
) for $160 million. These units service gathering systems in
Ohio, Pennsylvania and West Virginia.
The transactions are aimed at streamlining Chesapeake's portfolio
- a continued effort to focus on its core assets. These sales are
expected to immediately generate over $500 million and boost its
balance sheet, and at the same time have negligible impact on its
2014 cash flow guidance.
For over a year, the company has been working on closing a
multi-billion-dollar funding gap through the sale of its various
assets and reducing its expenses. However, Chesapeake's survival
is no longer dependent on its divestiture program. For 2014, the
company expects to lower its spending by 20% and is also
contemplating the spin-off of its drilling services unit.
Chesapeake is on track with its plan of reducing long-term debt
through monetizing its assets and cutting lease-hold spending.
This monetization initiative is mainly aimed at coping with the
mounting debt level as well as filling the funding gap for its
Chesapeake currently holds a Zacks Rank #3 (Hold).
Better-ranked oil and gas stocks include Zacks Rank #1 (Strong
Helmerich & Payne, Inc.