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Dec. 28 (Bloomberg) -- Chesapeake Energy Corp., the most active U.S. oil and natural-gas driller, agreed to sell a pipeline subsidiary to an affiliated partnership for $865 million.
Chesapeake Midstream Partners LP will buy Appalachia Midstream Services, owner of 47 percent of a 200-mile (320- kilometer) gathering system in the Marcellus Shale formation, according to a statement today. The system transports more than 1 billion cubic feet a day and has 15-year contracts with gas producers.
Chesapeake Energy is the largest gas producer in the Marcellus formation and holds the most acreage in the region, according to Bloomberg Industries. The formation, stretching from Canada to Kentucky, holds an estimated 84 trillion cubic feet of gas in dense shale rock, according to the U.S. Geological Survey.
Chesapeake Midstream, based in Oklahoma City, bought $500 million worth of pipelines in the Haynesville Shale in 2010 from Chesapeake Energy, which raises its ownership stake in the pipeline partnership to 46.1 percent from 42.3 with today’s sale.
The partnership, “expects to pursue a substantial number of asset dropdowns from Chesapeake in the years ahead,” Chesapeake Midstream Chief Executive Officer J. Mike Stice said in the statement.
The transaction is expected to close by Dec. 30. Tudor, Pickering Holt & Co. acted as the financial adviser to the conflicts committee of Chesapeake Midstream’s board and Richards, Layton & Finger PA was its legal adviser.
(Chesapeake has scheduled a conference call to discuss the deal at 9 a.m. New York time tomorrow, accessible at EVTS <GO>)
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