Chesapeake (CHK) to Sell Part of Remaining Eagle Ford Asset

Chesapeake Energy Corporation CHK recently announced that it has signed a contract to sell INEOS Energy, a part of its remaining Eagle Ford asset for $1.4 billion.

Chesapeake has agreed to sell the black oil component of its Eagle Ford asset, predominantly in Dimmit, LaSalle, and McMullen counties. It consists of about 172,000 net acres and 2,300 wells, along with any connected property, plant and equipment.

The fourth quarter of 2022 saw an average net daily production of about 36,000 barrels of oil equivalent (BoE) from these properties –comprising 81% liquid. As of Dec 31, 2022, net proven reserves connected to these assets were around 144 million barrels of oil equivalent (MMBoE).

Chesapeake anticipates the deal to conclude in the second quarter of 2023, with transaction effective as of Oct 1, 2022. At closing, the firm will receive $1.175 billion, subject to usual adjustments; the extra $225 million will be paid in yearly installments of $56.2 million.

Also, Chesapeake remains actively engaged with other parties regarding the rest of the Eagle Ford asset. According to Chesapeake, the proceeds will be used to pay down borrowings under its revolving credit facility and will also be made available for its share buyback program.

According to Chesapeake President and Chief Executive Officer, Nick Dell'Osso, this transaction marks another crucial step on the company’s route to departing the Eagle Ford while focusing on the core areas of Marcellus and Haynesville assets. While RBC Capital Markets, Citi, and Evercore serve as financial advisors to Chesapeake, Haynes &Boone, LLP serves as a legal advisor.

Zacks Rank & Key Picks

Chesapeake currently carries a Zack Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks for investors interested in the energy space include Murphy USA Inc. MUSA and Valero Energy Corporation VLO both sporting a Zacks Rank #1 and Halliburton Company HAL carrying a Zacks Rank #2 (Buy).

Murphy USA operates stations close to Walmart supercenters and sells low-cost, high-volume fuel. This helps the company to get a lot more business than its competitors. Another significant competitive advantage for the firm is its access to product distribution centers and pipelines, which helps control costs in the intensely competitive retail sector. Over the past 30 days, MUSA has witnessed upward earnings estimate revisions for 2023 and 2024.

Valero Energy, a TX-based company, is the largest independent refiner and marketer of petroleum products in the US. With 15 refineries spread across Canada, the United States and the United Kingdom, it has a daily refining capacity of 3.1 million barrels. Over the past 30 days, VLO has seen an upward revision in earnings estimates for 2023.

Halliburton Company, one of the major oilfield service companies in the world, provides a range of construction, engineering, and maintenance services to the energy, industrial, and government sectors.

Over the past 30 days, HAL has witnessed upward earnings estimate revisions.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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