Chesapeake Energy Sells Eagle Ford Package for $1.4B

Chesapeake Energy Corporation (NASDAQ: CHK) has announced that it has entered into an agreement to sell the Brazos Valley region of its Eagle Ford asset to WildFire Energy I LLC for $1.425 billion.

The company revealed that it had agreed to sell approximately 377,000 net acres and around 1,350 wells in the Brazos Valley region of the Eagle Ford asset, along with related property, plant and equipment. Average net daily production from these properties was approximately 27,700 barrels of oil equivalent during the third quarter of 2022, according to Chesapeake.

Chesapeake said it expects the transaction to close in the first quarter of 2023. The company noted that it will receive $1.2 billion upon closing, subject to customary adjustments, “with the additional $225 million paid in yearly installments of $60 million over the next three years and $45 million in year four”. Chesapeake said it anticipates the proceeds will be used to repay borrowings under its revolving credit facility and be available for its share repurchase program.

In a separate statement posted on its site, WildFire Energy confirmed the acquisition of approximately 377,000 net acres and approximately 1,350 wells in the Brazos Valley region from Chesapeake Energy Corporation. With the acquisition, WildFire noted that it will operate approximately 2,000 gross wells on approximately 600,000 net acres in the eastern Eagle Ford, encompassing the Burleson, Brazos, Robertson, Madison, Lee, Washington, and Grimes counties of Texas.

“[This] marks an important step on our path to exiting the Eagle Ford as we focus our capital on the premium, rock, returns and runway of our Marcellus and Haynesville positions,” Chesapeake President and Chief Executive Officer Nick Dell’Osso said in a company statement.

“We remain actively engaged with other parties regarding the rest of our Eagle Ford position,” he added in the statement.

Steve Habachy, the president and COO of WildFire Energy said, “this acquisition is highly synergistic with our existing assets and the combined size of the overall business positions WildFire Energy as a leading operator in the Eastern Eagle Ford basin”.

“The consolidation of 600,000 contiguous acres is transformative to the business and will drive economies of scale to deliver more high margin barrels to the advantageous Gulf Coast market,” he added.

WildFire Energy CEO Anthony Bahr said, “we look forward to future development of the area as we continue to grow the business in a safe, efficient, and environmentally conscientious manner alongside our service providers and landowners”.

“We are extremely appreciative of our sponsors, Warburg Pincus and Kayne Anderson, who have shared our vision of building strategic scale in the Eastern Eagle Ford basin and have supported us throughout the process,” Bahr added.

Back in March 2022, WildFire Energy announced the acquisition of approximately 45,000 net acres and 200 operated wells in the East Texas Eagle Ford from MD America Energy. WildFire said at the time that it funded the acquisition of MDAE with equity contributions from sponsors Warburg Pincus and Kayne Anderson and the company’s upsized revolving credit facility.

In July 2021, independent exploration and production company Hawkwood Energy LLC revealed that it had entered into definitive agreements to be acquired by WildFire Energy I LLC.

To contact the author, email andreas.exarheas@rigzone.com