Chesapeake contemplates exiting Permian basin

Chesapeake Energy Corp. recently received industry inquiries about a complete exit from the Permian basin, the company said Feb. 13, acknowledging that it might consider selling all its Permian basin assets if it were to receive a compelling offer.

The announcement came as Chesapeake provided details on its financial plan to fund anticipated capital expenditures during 2012 and provide additional liquidity for 2013. The company forecast its rapidly increasing liquids production will enable it in 2014 to reach equilibrium between its cash flow from operations and its planned drilling and completion capital expenditures.

Chesapeake anticipates receiving about $2 billion total in 60 days from two separate transactions. The company plans to complete a volumetric production payment on its Texas Panhandle Granite Wash assets and a financial transaction by a new unrestricted subsidiary formed to hold part of Chesapeake’s assets in the Oklahoma counties of Ellis and Roger Mills in the Cleveland and Tonkawa plays.

In addition, the company is pursuing joint venture transactions in its Mississippi Lime and Permian basin plays where it owns 1.8 million and 1.5 million net acres of leasehold, respectively.

Chesapeake’s acreage ownership in the Permian basin includes positions in the Bone Spring, Avalon, Wolfcamp, and Wolfberry plays.

The Oklahoma City independent’s Permian basin assets represent about 5% of the company’s total net proved reserves and current production. Chesapeake believes the Mississippi Lime joint venture, a Permian basin transaction, and various other minor asset sales could result in cash proceeds to Chesapeake of $6-8 billion by the end of the 2012 third quarter.

Chesapeake anticipates monetization proceeds involving a portion of its midstream assets, service company assets, and miscellaneous investments could bring estimated total monetization cash proceeds in 2012 to $10-12 billion.

The independent said it continues working toward previously announced debt-reduction goals despite low US natural gas prices.

Contact Paula Dittrick at paulad@ogjonline.com

 

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