As expected, Chesapeake Energy Corp. (NYSE: CHK) has sold all its midstream assets for a total price exceeding $4 billion. The sale involves three transactions, two with Global Infrastructure Partners (GIP) and one with Chesapeake Midstream Partners L.P. (NYSE: CHKM).
GIP will pay $2 billion for all of Chesapeake Energy’s limited partner units and its general partner interest in Chesapeake Midstream. In a separate transaction, Chesapeake Energy will sell its remaining midstream assets to Chesapeake Midstream, and in the third transaction, Chesapeake Energy will sell all its interests in its wholly owned subsidiary Chesapeake Midstream Development L.P. (CMD) to GIP. These two transactions are expected to generate more than $2 billion in cash. Chesapeake Energy said the assets have a book value of about $1.4 billion.
Chesapeake spun out the majority of its pipeline assets to Chesapeake Midstream in 2010, and as of December 31, 2011, owned 45.2% of the limited partner interest in the pipeline company. GIP owned 29.8% of Chesapeake Midstream’s limited partner interests at the end of December. Chesapeake and GIP are joint owners of Chesapeake Midstream’s 2% general partner interest.
The sale of CMD’s assets is expected to save the company approximately $3 billion in capex spending over the next three years.
The announcement came just hours before Chesapeake’s annual meeting, and bring the total value of the company’s divestitures so far this year to $6.6 billion. The company plans to sell assets valued at $11.5-14 billion by the end of 2012.
Shares of Chesapeake Energy are up about 1.5% in the pre-market this morning at $18.00 in a 52-week range of $13.32-$35.75. Shares of Chesapeake Midstream are up 4.5% at $26.20 in a 52-week range of $22.50-$31.19.
Paul Ausick
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