Chesapeake Energy (CHK) To Sell Midstream Assets For More Than $4B

Chesapeake Energy Corp. (NYSE:CHK) said it would sell its midstream assets in three separate transactions totaling more than $4 billion as the U.S. energy explorer struggles against soaring debt.

Chesapeake has agreed to sell its limited partner units and general partner interests in Chesapeake Midstream Partners L.P. (NYSE:CHKM) to Global Infrastructure Partners (GIP) for $2 billion.

The acquisition, which is expected to close by June 29, will result in GIP's ownership of 100% of CHKM's general partner interest and 69% of CHKM's limited partner units.

Chesapeake expects to receive the first half of the proceeds on June 15 with a final closing and payment of the second half of the proceeds scheduled to occur by June 29.

The company also entered into a letter agreement with Chesapeake Midstream Partners for potential sale of certain Mid-Continent gathering and processing assets.

In addition, Chesapeake has agreed with Global Infrastructure Partners for the sale its interests in wholly owned subsidiary Chesapeake Midstream Development LP.

Chesapeake expects total cash proceeds of more than $2.0 billion from these two transactions. The midstream divestitures will also enable Chesapeake to reduce previously budgeted capital expenditures by about $3.0 billion over the next three years.

Chesapeake's Chief Executive Aubrey McClendon said the proceeds of these transactions are an important part of the company's 2012 asset sales program that is on track to generate cash proceeds of $11.5-$14.0 billion.

Combined with the $2.6 billion of proceeds generated to date in 2012 from asset sales, this series of midstream transactions will bring its announced asset sales for the year up to about $6.6 billion. With Permian asset sale, Mississippi Lime JV and other miscellaneous asset sales still to come in the second half of the year, the company feels very good about its ability to meet its targeted range for 2012 asset sales.

CHK closed Thursday's regular session at $17.85, while CHKM ended at $25.07. Providing quality reviews, articles and writings on crude oil, energy and gas online.