Energy

Chesapeake Trades More Assets for Cash (CHK, KMP, EPD)

bearChesapeake Energy Corporation (NYSE:CHK) has created a 50/50 midstream joint venture with Global Infrastructure Partners that includes a significant portion of Chesapeake’s midstream assets in exchange for $588 million in cash. The new venture is called Chesapeake Midstream Partners, L.L.C.

The new JV includes virtually all of Chesapeake’s gas gathering assets in the Barnett Shale and most of the company’s midstream assets in the Arkoma, Anadarko, Delaware, and Permian basins. Chesapeake will sign agreements with the new company to provide gas gathering operations, focussing on non-regulated business activities at its non-shale operations. A senior officer from Chesapeake will serve as CEO of the new company, and Chesapeake will also provide operations staff and support staff.

The set-up is not unlike a pipeline master limited partnership, such as Kinder Morgan Energy Partners LP (NYSE:KMP) or Enterprise Products Partners LP (NYSE:EPD), and that may well be the next step for this new venture. Chesapeake already operates another midstream company for its Fayetteville, Haynesville, Marcellus, and other shale operations.

Chesapeake also said that it will close a new $500 million secured revolving credit facility that the company will use to fund capital expenditures for constructing new gas gathering systems. The company will cut another revolving facility from a capacity of $460 million to $250 million, which it will use to fund the activities of its existing shale gas gathering operations.

Chesapeake has been monetizing assets for more than a year, and this deal with Global Infrastructure Partners is another move in that direction. The company owns abundant assets, but needs low natural gas prices force it to raise cash for capex and to reduce its revolving debt.

Chesapeake shares are up about 1% in early trading, to $27.83. The company’s 52-week trading range is $9.84-$39.46.

Paul Ausick

Want to Retire Early? Start Here (Sponsor)

Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?

Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.

Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.