Oil and natural gas producer Chesapeake Energy Corp. (CHK: Quote) is close to selling its pipeline assets to Global Infrastructure Partners for more than $4 billion, according to a Bloomberg report. A deal, which will help Chesapeake cut debt and plug a cash-flow shortfall, is expected to be reached by the weekend.
The company is now in advanced talks to sell all of its interests in Chesapeake Midstream Partners L.P. (CHKM: Quote) and also other pipeline assets. Chesapeake Midstream has 4,000 miles of pipelines and is one of the largest natural-gas gatherers and processors in the U.S.
Chesapeake has a 45.2 percent share of Chesapeake Midstream's common units, valued at about $1.6 billion. It also owns half of Chesapeake Midstream's general partner.
Global Infrastructure Partners or GIP, is an infrastructure owning company, a private equity fund led by Credit Suisse (CS) and General Electric (GE). Chesapeake Midstream was formed in 2009 as a joint venture between Chesapeake Energy and GIP. It later went public in 2010.
Oklahoma City-based Chesapeake, second-largest U.S. natural gas producer, has been pressured U.S. natural gas prices, which has been at its lowest in the past decade. The company has led the industry in natural gas production growth over the past 10 and five years.
The company has earlier said that it may sell part of its midstream assets by the end of September to help raise cash. It is seeking to sell as much as $20.5 billion assets through next year to bridge a cash-flow shortfall.
According to ratings agency Moody's Investors Service, Chesapeake requires to raise at least $7 billion by selling its assets by the end of the year to avoid a credit downgrade.
Chesapeake's largest shareholders, Southeastern Asset Management, Inc. with a 13.6 percent stake, and Carl Icahn with a 7.6 percent stake, have been pushing for shedding its pipeline assets and other non-core business in order to focus on its core oil and gas drilling assets.
Earlier in the week, the two biggest shareholders also managed to replace nearly half of Chesapeake's board to improve governance and to the company that has seen a sharp erosion in share value as well as to plug huge funding gaps.
Chesapeake recently posted a narrower quarterly loss, aided by higher production and lower derivative losses. But the company still grapples with depressed gas prices that have weighed down on the industry.
Reports recently indicated that Chesapeake may be acquired by oil giants such as Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX). Chesapeake is an attractive gain, given its vast onshore shale gas reserves.
CHK closed Tuesday's regular trading session at $17.00, up $0.48 or 2.91% on a volume of 39.42 million shares. The stock gained a further $0.26 or 1.53% in after-hours trading.
CHKM closed Tuesday's regular trading session at $24.17, up $0.52 or 2.20% on a volume of 0.28 million shares. The stock gained a further $0.47 or 1.94% in after-hours trading.
| || |
| To receive FREE breaking news email alerts for Chesapeake Energy Corp. and others in your portfolio|
by RTT Staff Writer
For comments and feedback: firstname.lastname@example.org