Chesapeake Energy Corp. on Monday announced that, as part of its 2011-12 strategic and financial "25/25 Plan," the company has decided to sell all of its Fayetteville Shale assets, as well as its equity investments in Frac Tech Holdings, LLC and Chaparral Energy, Inc. If these sales are completed, Chesapeake anticipates that the combined pre-tax proceeds could exceed $5.0 billion.
In the Fayetteville Shale, the company is the second-largest producer of natural gas with current net production of approximately 415 million cubic feet of natural gas equivalent production per day and owns approximately 487,000 net acres of leasehold. Chesapeake owns 25.8% of Frac Tech and 20.0% of Chaparral.
In light of Chesapeake's plan to reduce its long-term debt by 25% in 2011-12, the company plans to use the net proceeds from these sales and its previously announced Niobrara joint venture to retire approximately $2.0 - $3.0 billion of its shorter-dated senior notes and to also reduce borrowings under its revolving bank credit facility. The amount of senior notes retired will depend in part on Chesapeake's ability to acquire its senior notes in the market or through tender offers.
Aubrey K. McClendon, Chesapeake's Chief Executive Officer, commented, "We have received strong positive feedback from a number of our investors with respect to the announcement of our 25/25 Plan in early January and last week's announcement of our $1.3 billion Niobrara joint venture with an affiliate of CNOOC Limited (NYSE:CEO; SEHK:0883). We believe the three proposed asset sales announced today and the Niobrara joint venture are all likely to be completed in the first half of 2011 and will provide us with strong momentum into the second half of 2011 as we move forward in executing our plan."
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