Chesapeake Energy to divest some shale assets to Southwestern Energy $5.37 bn

Chesapeake Energy Corp, the second-largest producer of natural gas in the US, today agreed to sell assets in the Southern Marcellus Shale and a portion of the Eastern Utica Shale in West Virginia to Southwestern Energy Co for about $5.37 billion.

The Oklahoma-based company is selling approximately 413,000 net acres and approximately 1,500 wells in Northern West Virginia and Southern Pennsylvania, of which 435 are in the Marcellus and Utica formations, along with related property, plant and equipment. Average net daily production from these assets was approximately 56,000 boe in September.

The acquired assets include 256 operated and producing Marcellus and Utica horizontal wells and an additional 179 non-operated or non-producing Marcellus and Utica horizontal wells. As of 31 December 2013, net proved reserves associated with these assets were approximately 221 million metric barrels of oil equivalent.

''With this acquisition, we will have secured a complementary third premier acreage position. The early drilling in both the liquids-rich Marcellus and emerging Utica plays has confirmed the resource potential and the economic strength of a long-term development program. Furthermore, this transaction fits perfectly with Southwestern's vertical integration strategy and, through our operational strengths and core competencies, we expect to drive exceptional future value from these assets," said, Steve Mueller, president and CEO of Southwestern Energy.

Doug Lawler, Chesapeake's CEO, commented, ''Earlier this year, we committed to unlocking the significant value inherent in this asset, recognizing the disconnect of its perceived value within our portfolio. .............  We look forward to deploying the proceeds from this significant transaction in ways that will continue to drive even greater shareholder value.''

Chesapeake, which is facing a cash shortfall of several billion dollars due to low gas prices, aims to reduce its long-term debt.

Natural gas prices in the US have recently fallen to 10-year lows, making natural gas drilling operations unprofitable and Chesapeake has curtailed its drilling in some plays and shut production in some gas fields.

Chesapeake prospered during the shale gas boom in the US and went on an acquisition spree of unexplored shale gas fields, which led to its earlier CEO Aubrey McClendon being forced out in April last year because of over spending.