Chesapeake Energy pins down acquisition deal
US unconventional gas producer Chesapeake Energy said March 9 it had completed its previously-announced acquisition of E&P company Chief E&D Holdings.
The cash and share deal, worth $2.4bn January 25 when Chesapeake signed the definitive agreement, also includes non-operated interests held by affiliates of privately owned business Tug Hill, Inc.
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Chesapeake will now take over gas flows of around 835mn ft3/day in the Marcellus shale formation in northeast Pennsylvania.
CEO and president Nick Dell'Osso said the Chief transaction would lead to additional capital allocations toward the Marcellus Shale position, which would "accelerate returns for our shareholders." It expects the acquisition to be cash flow accreditive, with natural gas assets this year generating around 75% of projected cash flow.
"With the integration of these assets into our existing portfolio, we look forward to generating greater free cash flow, growing our dividend programs, and improving our greenhouse gas emissions metrics as we continue to responsibly deliver reliable, affordable, lower carbon energy in 2022 and beyond," Dell'Osso said.
Combining the businesses will also allow Chesapeake to merge midstream assets, boosting its pro forma output capacity by up to 200mn ft3/d of gas from the Marcellus Shale formation. The acquired production, of around 800 to 900mn ft3/d from one to two rigs, is set to be maintained over the next several years.
When Chesapeake filed for Chapter 11 bankruptcy protection just 21 months ago, the company was staring into a void with outstanding debts of $9.1bn. A court-approved plan resulted in $7.8bn of that being equitised, and removed preferential entitlements to list shares on Nasdaq.
The recovery since then has focused on converging Chesapeake's portfolio with its core assets. In Wyoming, for instance, it has a $450mn deal to sell its Powder River Basin assets to Continental Resources.