Chesapeake Energy Announces Spin-off And Non-Core Asset Sales

Chesapeake Energy CHK Friday announced updates to its current 2014 asset sales and divestitures, as well as the expected impact of these transactions on its 2014 outlook. Additionally, the company released preliminary guidance for 2015 adjusted production growth and capital expenditures.

Chesapeake hosted a live webcast of its analyst day event Friday. The webcast and company data pertaining to the event can be accessed from Chesapeake's investor relations page.

As Chesapeake continues to divest its non-core assets, the company expects to complete the following transactions within the second and third quarters of 2014.

Spin-Off Of Oilfield Services Business
Chesapeake has announced that it plans to move forward with the spin-off of Chesapeake Oilfield Operating. This spin-off has been provoked by the company's aggressive attempts to cut the fat from its balance sheet and focus more on opportunities with the highest possible rate of return.

The company expects to benefit from the spin-off by eliminating an approximate $1.1 billion of consolidated debt from its balance sheet, as well as receiving approximately $400 million in dividends. Further, the company obtained a private letter ruling from the IRS and intends for the deal to be tax-free for shareholders in terms of federal income tax.

Chesapeake expects the process to be completed by June 30, 2014.

Non-Core Asset Sales

Chesapeake and preferred members at CHK Cleveland Towonka, a Chesapeake subsidiary, have entered into a nonbinding agreement to transfer Chesapeake's common shares of CHK to the preferred members. The deal would benefit Chesapeake by reducing approximately $1 billion of equity attributable to non-controlling interests, as well as a $160 million reduction in liabilities related to future overriding royalty interest obligations.

In regard to the deal Chesapeake CEO Doug Lawler said, "Exiting our CHKCT preferred equity arrangement will reduce Chesapeake's balance sheet complexity and future commitments." Lawler continued, "We feel this is an opportune time to complete this transaction for all parties."

Additionally, the company is in the process of a deal to sell non-core producing assets in Texas and Oklahoma, as well as non-core acreage packages in Pennsylvania and the Powder River Basin in Wyoming. If these deals are completed, the combined total value of these sales and divestitures and year-to-date proceeds from asset sales as of May 7 would more than $4 billion for 2014.

Lawler noted that these deals would provide a significant benefit to the leverage position with minimal effect on the company's operations.

2015 Guidance
The company believes it will be able to achieve a seven to 10 percent production growth rate with a capital expenditure budget of $5.5-6 billion. Further, the company has projected a five year annual growth rate of seven to nine percent.

Posted In: NewsGuidanceAsset Sales
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