CHK to Sell $4B Pipeline Assets - Analyst Blog
11 6월 2012 - 10:45PM
Zacks
Natural gas giant
Chesapeake Energy Corporation (CHK) has struck an
asset sale deal with private equity firm Global Infrastructure
Partners (GIP) related to its pipeline properties for a total
consideration of $4 billion in cash. This marks the largest deal so
far this year by the company, which is struggling to fund its
capital budget amid diminishing cash flows.
As part of the three-tier asset
sale pact, Chesapeake, the second largest natural gas producer in
the U.S., after ExxonMobil Corporation (XOM) will
sell its interests in Chesapeake Midstream Partners
LP (CHKM) for about $2 billion. Following the transaction,
GIP will own all of the general partner and 69% of the limited
partner units of Chesapeake Midstream. Additionally, Chesapeake
plans to divest certain Mid-Continent gathering and processing
assets to Chesapeake Midstream. Finally, the Oklahoma
City-based company will sell its stakes in a subsidiary –
Chesapeake Midstream Development LP – for an extra
$2 billion to GIP.
The Chesapeake Midstream properties
up for sale comprise 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).
Importantly, this latest
divestiture will allow Chesapeake to shed its earlier announced
capital expenditure by $3 billion over the next three years.
Recently, Chesapeake also increased the size of its unsecured term
loan to $4 billion from $3 billion, for paying down its revolving
credit line. The new loan comes at an initial interest rate of
8.5%, which could eventually exceed 11.5% if the company fails to
pay it off by the end of the year.
Chesapeake has been in the news in
recent times as it is under pressure to fund its capital budget
amid diminishing cash flows on the back of falling natural gas
prices. Chesapeake 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. Till date, the company
has been able to raise approximately $6.6 billion from the asset
sale deals.
Earlier, Chesapeake had plans to
sell 337,481 net acres of Utica-Point Pleasant Trend acreage in
Ohio, as per a prospectus released by Denver-based Meagher Energy
Advisors. It includes drilling rights in 19 Ohio counties that are
mainly situated to its north-east and south-east.
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 Report
CHESAPEAKE MIDS (CHKM): Free Stock Analysis Report
STATOIL ASA-ADR (STO): Free Stock Analysis Report
TOTAL FINA SA (TOT): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
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Access Midstream Partners L.P. (NYSE:CHKM)
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Access Midstream Partners L.P. (NYSE:CHKM)
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