A partnership led by Chesapeake Energy Corp. (CHK) plans to spend about $900 million on a system to collect and move natural gas from eastern Ohio, deepening the company's investment in the state's Utica shale region.
The move comes at a challenging time for natural gas companies struggling with a supply glut that has pushed prices to 10-year lows. The planned system unveiled Tuesday will also handle natural-gas liquids, which have fetched higher prices.
In its latest deal, the natural-gas company partnered with M3 Midstream LLC and EV Energy Partners LP (EVEP) to develop the complex, which Chesapeake called the largest of its kind in eastern Ohio.
The partnership plans to spend about $900 million over the next five years, with most capital invested in the first two years. Affiliates of Chesapeake's midstream subsidiary own 59 percent of the partnership. M3 Midstream and EV Energy own 33 percent and 8 percent, respectively.
French oil major Total SA, which holds a 25 percent stake in a separate Chesapeake partnership to develop wells in the Utica shale play, also has an option to participate in the midstream project.
Chesapeake has been under pressure from some shareholders and analysts to reduce spending and pare debt. The company is responding with asset sales but also says it doesn't want to pass up opportunities to buy shale properties before prices rise.
Total bought its stake in a swath of Chesapeake's Ohio shale discovery for $2.32 billion in January, helping the U.S. producer move toward its goal of reducing long-term debt by 25 percent while boosting production 30 percent.
Chesapeake shares were recently off 9 cents at $24.61 after hours, while EV Energy was up 22 cents at $72.73.
Copyright (c) 2012 Dow Jones & Company, Inc.
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