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Chesapeake Disposes Texas Assets

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Natural gas provider, Chesapeake Energy Corporation (CHK) has disposed 57,275 net acres and 11 producing wells in the Woodbine/Eagle Ford play in East Tex., to privately owned Energy & Exploration Partners, Inc. The buyer is an independent exploration and production company based in Fort Worth, Tex.

The Woodbine/Eagle Ford region in East Texas is a prolific unconventional resource play containing a number of prospective targets. These include the Woodbine sandstone, Eagle Ford shale and Lower Cretaceous formations of the Buda, Georgetown, Edwards and Glen Rose.

The sale of these assets is in line with Chesapeake’s strategy to reduce its long-term debt by monetizing its assets and cutting lease-hold spending. At the end of fourth quarter 2012, the debt balance stood at $12.2 billion, representing a debt-to-capitalization ratio of 40.5%.

Earlier this month also, Chesapeake sold proven reserves and undeveloped leasehold interests in Kingfisher and Canadian counties, Okla. to Houston-based energy company Gastar Exploration Limited (GST) for $75.2 million.

The asset disposals by Chesapeake are mainly aimed at reining in debt as well as filling the funding gap for its mounting expenses in the wake of continued low natural gas prices.

Natural gas accounted for about 77% of Chesapeake’s fourth quarter 2012 production, making results vulnerable to fluctuations in the natural gas market. Chesapeake is the second-largest producer of natural gas in the U.S. after Exxon Mobil Corporation (XOM).

Chesapeake is scheduled to release its first quarter 2013 earnings results on May 1, before the opening bell. The Zacks Consensus Estimate for the first quarter is pegged at 23 cents, representing a year-over-year growth of 28.8%.

Chesapeake currently retains a Zacks Rank #2 (short-term Buy rating). Range Resources Corporation (RRC), another big player in the oil and gas industry, is also a Zacks Ranked #2 stock.


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