Bloomberg News

Chesapeake Agrees to Sell Utica Shale Acreage; Shares Rise

November 07, 2011

Nov. 4 (Bloomberg) -- Chesapeake Energy Corp., the most active U.S. oil and natural-gas driller, said it is selling part of its holdings in the Utica Shale oil and gas field in Ohio for $1.14 billion. Its shares rose 6 percent.

Chesapeake will get $640 million from an undisclosed buyer as part of the sale of a 25 percent stake in 650,000 acres, according to a statement. Its partner, private investment group EnerVest Ltd., will get $90 million, EnerVest Chief Executive John Walker said yesterday in a telephone interview.

The buyer, an international energy company, will contribute as much as $1.5 billion toward Chesapeake’s drilling costs, and $210 million toward EnerVest’s costs, the companies said.

The deal values the companies’ Utica acreage, which is in an area containing both gas and petroleum liquids, at about $15,000 an acre, the statement said.

Chesapeake also sold $500 million worth of preferred shares in a new subsidiary, CHK Utica LLC, to private investment firm EIG Global Energy Partners LLC of Washington.

The funds will pay for drilling 700,000 acres of the Utica, the statement said. The acreage in both deals largely overlaps, Jim Gipson, a Chesapeake spokesman, said in an e-mail.

An additional $750 million in CHK Utica’s preferred shares will be sold to investors, Chesapeake said.

Utica Holdings

Some investors have been concerned that Chesapeake is spending too much on acreage in the Utica, Michael Bodino, head of energy research at Global Hunter Securities LLC, said in a telephone interview.

“Doing a transaction like this certainly goes a long way to closing that gap very quickly,” said Bodino, who is based in Fort Worth, Texas. Bodino rates Chesapeake a “buy” and owns none of its shares.

Chesapeake, based in Oklahoma City, has about 1.5 million acres in the Utica formation, which stretches from Ohio to Canada. The company has spent $2 billion to buy leases in Ohio, Chairman and Chief Executive Officer Aubrey McClendon said in Columbus, Ohio, Sept. 23.

Before yesterday, Chesapeake had sold more than $11.5 billion in assets over the past two years to help fund production and buy new acreage, according to data compiled by Bloomberg.

Chesapeake’s partners in previous drilling acreage deals include BHP Billiton Ltd. of Australia, China-based CNOOC Ltd. and France’s Total SA.

The Utica Shale is a dense rock formation similar to the Barnett and Marcellus shales. Energy companies have learned how to develop shales in the last decade using horizontal drilling and hydraulic fracturing, a technique that breaks open the rock with a blast of water, sand and chemicals.


The Utica in Ohio may hold as much 5.5 billion barrels of oil and 15.7 trillion cubic feet of natural gas, according to the state’s Department of Natural Resources.

In a separate transaction yesterday, Houston-based EnerVest bought $1.2 billion worth of oil-and-gas property in Texas’s Barnett Shale field from Encana Corp. and an unnamed seller. EnerVest has bought more than $2 billion in the Barnett Shale in the last year, Walker said in a statement.

Chesapeake’s third-quarter profit increased to $879 million, or $1.23 per share, from $515 million, or 75 cents, in the same quarter last year as it shifted production to petroleum liquids from gas, the company said in a separate statement.

Chesapeake’s oil and liquids production rose to 8.7 million barrels during the quarter, from 4.5 million in the year-ago quarter. Gas production rose to 306 billion cubic feet from 280 billion.

Jefferies & Co. advised Chesapeake on the Utica joint venture.

The statements were issued after the close of regular trading in New York. Chesapeake shares rose $1.75 to $30.78 at 7:27 p.m. in New York.

(Chesapeake will hold an earning conference call at 9 a.m. today New York time. To listen, go to EVTS <GO>.)

--With assistance from Jim Polson in New York. Editors: Charles Siler, Susan Warren

To contact the reporter on this story: Mike Lee in Dallas at

To contact the editor responsible for this story: Susan Warren at

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