Times are tough for Oklahoma City-based Chesapeake Energy (CHK). Chesapeake is the number-two producer of natural gas in the U.S., and is also the nation’s most active driller of new wells. Unfortunately for Chesapeake, natural gas continues to settle to new lows. Natural gas managed to slide under $2 per million BTUs on Wednesday. Chesapeake’s revenue in 2012 has fallen in-step with the declining price of natural gas.
So, what is Chesapeake doing about the pinch? It’s raising cash by selling assets to rival Exxon Mobil (XOM) and other investors. In a statement Monday, Chesapeake released information about $2.6 billion generated through three separate deals to numb the pain from natural gas’s plummet. Chesapeake agreed to sell 58,400 acres of rich oil shale in Oklahoma’s Woodford Shale to the nation’s top energy company, Exxon. The land was valued at $590 million. It raised an additional $1.25 billion through preferred stock sales to a Blackstone Group affiliate. The new subsidiary created by the deal will operate as CHK Cleveland Tonkawa LLC, and Chesapeake will retain control over 100% of its equity. Lastly, Chesapeake signed a $745 million deal with an affiliate of Morgan Stanley (MS) to sell off 10 years of volumetric-production payments. The deal allows the energy company to be paid upfront for the next decade of natural gas production in its Anadarko Basin wells.
Is There Hope For Natural Gas?
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