Tag Archives: Mississippi Lime

Business, Finance, Occupation & Industry

3 Oil Companies Spending Money to Save Money

Leave a comment

By Matt DiLallo, The Motley Fool

Filed under:

I’m sure you’ve heard it said that you have to spend money to make money. Several companies in the oil and gas industry have a different spin on that phrase, as these companies believe you need to spend money in order to save it. In each case the company is building out its own business unit to save the money it would have spent by contracting with a third party. In doing so, these companies are also building up a hidden asset that one day could be unlocked.

An Oasis of hidden value
The Bakken has created a lot of value for energy investors; however, that value doesn’t come cheap. It’s very expensive to drill in the Bakken, with costs upwards of $10 million per well. To get that cost down, exploration and production companies are exploring all options, including taking well services in-house.

That’s exactly what Oasis Petroleum decided to do when it formed Oasis Well Services. The company made an initial investment of $24 million in equipment, which has been money well spent. The business is exceeding expectations both in terms of performance and savings since completing its first frac job last March. In the past year the business saved the company $17.5 million in capital, and it expects to save about $500,000 per gross well going forward. It also expects to generate about $200,000 per gross well of incremental cash flow from its non-operated partners going forward. This has enabled the company to already recoup its initial investment in the business.

Indispensable value
One of the key environmental issues of fracking is disposing of the water after it’s been used. However, because of the rapid production growth in many new plays, this disposal infrastructure simply doesn’t exist. Instead of hiring a company like frack-water treatment specialist Heckmann to truck the produced water away, some companies are simply building their own disposal systems.

In the Mississippi Lime, top driller SandRidge Energy has already invested half a billion dollars on its own saltwater disposal system. The company has 116 active disposal wells and has laid 700 miles of pipeline. This has cut the percentage of produced water trucked from 6% early last year to under 2% by the second half. Overall, the system is saving the company $2 per barrel of water when compared with trucking it. This savings is yielding a very quick payback for SandRidge.

Cutting out the middleman
One of the more common money-saving investments an oil and gas company will make is in building out a midstream system to enhance its operations and profits. Lately, though, that trend has been reversed, as we’ve seen a large exodus of these operations, with midstream MLP IPOs a hot commodity. One company that still does have its midstream operations is Devon Energy .

With ownership of 16,000 miles of pipeline and 62 processing plants in both the U.S. and Canada, Devon’s midstream operations are impressive.

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

China Will Take the Top Spot That America No Longer Wants

Leave a comment

By Matt DiLallo, The Motley Fool

Filed under:

As Americans, we’re a pretty competitive bunch. We’re never thrilled to see our country slip from the top spot of any standing. However, I’d venture to say we’d be downright giddy to give up the top spot, to China no less, when it comes to our oil imports.

That’s exactly what’s on track to happen according to OPEC. The oil consortium now believes that China will overtake the U.S. as the top crude oil importer by 2014. According to the group’s analysis, China oil imports are expected to top 6 million barrels per day this year while U.S. imports are expected to decline below 6 million barrels per day by 2014.

We’re really seeing a monumental shift in demand. However, the shift isn’t completely due to China‘s voracious demand for energy. Last December, China‘s crude oil imports rose just 1.3% to 5.57 million barrels a day. What’s changing is U.S. demand, which plunged 21% last year.

Two main factors have contributed to plunging demand stateside. First, Americans have simply stopped driving as much as we had in the past. Overall, the annual driving per person has slipped by almost 8% since 2005. While the sluggish economy has played a role, it’s not the driving force behind our driving less. Instead, there seems to be an overall shift in our driving pattern which by the end of the day has us using less gas.

The other major factor contributing to the decline in our oil imports is the fact that we’re producing a lot more oil. According to OPEC, “the shale boom in the U.S. is threatening to drastically reduce America’s oil import needs.” As an American, that statement should make you feel proud.

Last year our domestic crude oil output rose to nearly 7.2 million barrels of oil per day, which is the most we’ve produced since the early 1990s. Overall, we produced 84% of our own energy needs last year. According to the International Energy Agency, we could become the largest global oil producer by 2020, while North America could be a net exporter of oil by 2030.

We’re simply seeing stunning production growth here in the U.S. In the Bakken, for example, Continental Resources projects that its production and reserves will increase threefold by 2017. Meanwhile, smaller producers like Kodiak Oil & Gas have seen production grow by triple digits every year since 2010. The company, which expects to drill 75 more wells this year, estimates that it can drill another 950 wells in the future.

Other formations with significant oil resources are still emerging. In the Mississippi Lime formation of Oklahoma and Kansas, SandRidge Energy believes it can drill 11,000 wells over the next 18 years. The company more than doubled its production year over year and it has an ambitious plan to continue growing.

Finally, more well-known production basins like the Gulf of Mexico continue to show they still have some life left. Just

From: http://www.dailyfinance.com/2013/04/13/china-will-take-the-top-spot-that-america-no-longe/

Business, Finance, Occupation & Industry

3 Reasons to Buy SandRidge Energy

Leave a comment

By Matt DiLallo, The Motley Fool

Filed under:

Over the past few years SandRidge Energy has undergone several transitions, which has dramatically altered the company and in some ways clouded its investment picture. In an effort to simplify the investment thesis, I’ve distilled everything down to three reasons why you’d buy shares of the company.

1. SandRidge is the top lease holder and most active driller in the Mississippi Lime formation. The central thesis to an investment in SandRidge is your belief in the company’s Mississippian growth plan. While the company has operations in the shallow water of the Gulf of Mexico and the West Texas Overthrust, SandRidge is virtually synonymous with the Mississippian. It has twice the wells as its closest competitor, Chesapeake Energy . It’s running three times the number of drilling rigs as Devon Energy . As you can see in the slide from a recent SandRidge Energy investor presentation below, the company is simply head-and-shoulders above its competitors in the play:

Source: SandRidge Energy Investor Presentation

The company has also spent nearly half a billion dollars to build out its own saltwater disposal system and it’s even installed its own electrical grid. It’s done all this in an effort to get its well costs down as low as possible. These wells, which produce on average 45% oil and natural gas liquids along with 55% natural gas, yield a very high rate of return for the company. That rate is increased thanks to the aforementioned infrastructure investments.

The rest of the energy industry is beginning to take notice of the play’s potential. Phillips 66 recently signed a deal to get Mississippian oil shipped to a local refinery. When added to SandRidge’s recent percent-of-proceeds natural gas liquids contract with Atlas Pipeline Partners we’re beginning to see some validation of the Mississippian’s tremendous potential for SandRidge.

2. The company has improved its financial position and its capital plan is fully funded through 2014 with multiple options to fund its plan through 2015. Like most of the smaller oil and natural gas exploration and production companies, SandRidge has more potential for growth than it can fund through its current cash flow. That’s forced the company to sell assets, including the recent sale of its Permian Basin acreage. That deal provided enough capital to enable the company to pay down its debt, while fully funding its capital plans through the end of next year. The company has a variety of options to access additional funding which puts it on very solid financial footing for the first time in years.

3. SandRidge grew its Mississippian production 131% year over year while also growing its oil reserves by 35%. The company’s investments in the Mississippian are beginning to pay off with visible production growth. Last year the company more than doubled its production in the play. Meanwhile, it was also able to grow its overall oil reserves by 35%.

The company sees its Mississippian oil and liquids production …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

A Brighter Future for Chesapeake Energy?

Leave a comment

By Arjun Sreekumar, The Motley Fool

Filed under:

With a reconstituted Board of Directors in place and former CEO Aubrey McClendon out of the picture, investors are wondering if Chesapeake Energy deserves a second chance.

As the company continues its search for McClendon’s successor, Chief Operating Officer Steve Dixon has assumed the temporary role of acting CEO.

In a conference call on Monday, Dixon helped restore investor confidence in the company’s future. He noted that Chesapeake’s new focus on financial discipline will be a defining characteristic going forward, as opposed to just a temporary measure intended to reassure its creditors.

In particular, he highlighted three key priorities for the company: “We will remain focused on increasing our liquids production, driving capital efficiencies across our business and enhancing our financial flexibility to prudently fund our future growth.”

Dixon also expressed “tremendous confidence” that Chesapeake’s spending would not exceed its planned capital expenditure budget of around $6 billion.  

Has a more cautious, financially disciplined Chesapeake emerged from the shadows of its old, risk-loving self? Or do old habits die hard?

Chesapeake’s recent progress
Based on its progress over the past few quarters, Chesapeake certainly seems to be on the right path. It’s achieving several key objectives and even surpassing major production milestones. For the first quarter, Dixon said the company’s current level of leasehold capital spending is on track to come in below its budgeted target. Similarly, it’s also on track to achieve its production targets for the quarter, despite some midstream outages and weather-related challenges in the mid-continent.

The company’s progress in reducing well costs and cycle times has also been impressive. In the fourth quarter, it reported an average spud-to-spud time of 18 days, down more than 30% from the year-earlier quarter. And over the same time period, average drilling and completion costs per well also declined by about 30%. For 2013, the company expects lease operating and G&A expenses to come in at or below budget.

These new developments stand in sharp contrast to the company’s previous tendency of overshooting on its targets and estimates.  

Not only did it frequently exceed initial estimates for its spending budget in previous years, it has also been known to overestimate production figures and property values. The most recent instance was when it received just under $2,400 per acre for its Mississippi Lime assets, which it agreed to sell to Chinese oil company Sinopec in February.

That value was just a fraction of the $7,000-$8,000 per acre value the company assigned to those assets last year. It was also significantly less than the price SandRidge Energy , another major player in the Mississippi Lime, received for its assets in the play back in 2011. In successive transactions with Atinum Partners and Repsol YPF, SandRidge received about $4,425 and $2,750 per acre. Notably, SandRidge’s acreage didn’t have any currently producing wells, unlike Chesapeake’s, making Chesapeake’s deal appear even more underwhelming.

What to expect going forward
Looking ahead, the company still …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Chesapeake Energy Corporation Announces 2013 First Quarter Operational Update and Financial Results

Leave a comment

By Business Wirevia The Motley Fool

Filed under:

Chesapeake Energy Corporation Announces 2013 First Quarter Operational Update and Financial Results Release Date and Conference Call Information

OKLAHOMA CITY–(BUSINESS WIRE)– Chesapeake Energy Corporation (NYS: CHK) has scheduled to release its 2013 first quarter operational update and financial results before market open on Wednesday, May 1, 2013. A conference call to discuss the results has been scheduled for the same day at 9:00 am EDT. The telephone number to access the conference call is 913-312-0844 or toll-free 888-811-5445. The passcode for the call is 8842603. We encourage those who would like to participate in the call to place calls between 8:50 and 9:00 am EDT.

For those unable to participate in the conference call, a replay will be available for audio playback at 2:00 pm EDT on Wednesday, May 1, 2013 and will run through 2:00 pm EDT on Wednesday, May 15, 2013. The number to access the conference call replay is 719-457-0820 or toll-free 888-203-1112. The passcode for the replay is 8842603.

The conference call will also be webcast live on Chesapeake’s website at www.chk.com in the “Events” subsection of the “Investors” section of the company’s website. The webcast of the conference will be available on our website for one year.


Chesapeake Energy Corporation (NYSE: CHK) is the second-largest producer of natural gas, a top 11 producer of oil and natural gas liquids and the most active driller of new wells in the U.S. Headquartered in Oklahoma City, the company’s operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the U.S. Chesapeake owns leading positions in the Eagle Ford, Utica, Granite Wash, Cleveland, Tonkawa, Mississippi Lime and Niobrara unconventional liquids plays and in the Marcellus, Haynesville/Bossier and Barnett unconventional natural gas shale plays. The company also owns substantial marketing and oilfield services businesses through its subsidiaries Chesapeake Energy Marketing, Inc. and Chesapeake Oilfield Operating, L.L.C. Further information is available at
 www.chk.com where Chesapeake routinely posts announcements, updates, events, investor information, presentations and news releases.

Chesapeake Energy Corporation
Jeffrey L. Mobley, CFA, 405-767-4763
jeff.mobley@chk.com
or
Gary T. Clark, CFA, 405-935-6741
gary.clark@chk.com
or
Media Contacts:
Michael Kehs, 405-935-2560
michael.kehs@chk.com
or
Jim Gipson, 405-935-1310
jim.gipson@chk.com

KEYWORDS:   United States  North America  Oklahoma

INDUSTRY …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Make Money in Growing Natural Gas Stocks the Easy Way

Leave a comment

By Selena Maranjian, The Motley Fool

Filed under:

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some natural-gas-related stocks to your portfolio, the First Trust ISE-Revere Natural Gas Index could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The First Trust ETF‘s expense ratio — its annual fee — is 0.60%.

This ETF has performed poorly in recent years, losing to the world market over the past three and five years. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver. And it’s the future that counts more than the past, as well.

Why natural gas?
Energy is a critical staple, and natural gas has increasingly become an important part of the energy industry. Its recent low prices have helped spur interest in it, though that has also caused some natural-gas companies some grief. Still, the low prices won’t last forever, and there’s a lot of potential in these companies, especially as many of them expand their non-gas operations.

More than a handful of natural-gas-related companies struggled over the past year. Magnum Hunter sank 44%, for example, and that actually represents a big rebound from earlier lows. It’s heavily shorted, in part due to significant debt and a substantial focus on natural gas in its operations. Some don’t appreciate its shift toward oil and liquids, though, and its diversification across several promising shale fields.

SandRidge Energy shed 29%, fighting activist investors, and selling off some assets to raise funds and invest more in the Mississippi Lime field. Bulls are hopeful about its prospects there, while bears might not like seeing so many eggs in that one basket, and many of them see the company as still overvalued, too.

Apache lost 27%, partly penalized for recent production levels that have been lower than hoped for. But that’s due to the company investing capital in projects that won’t immediately bump production much. About 11% of Apache’s revenue last year came from natural gas and, unlike some peers, it is cash-flow-positive, as well. Meanwhile, last month it hiked its dividend by a big 18%, so that it now yields 1.1% (versus 0% for many others). To some of our analysts, it seems inexpensive compared with its peers.

Devon Energy fell 20%, and has also seemed like a bargain recently. It, too, has been shifting its focus more to oil and liquids. The company has been quite impressive, paying down debt, rapidly hiking its dividend, reducing its share count, and accumulating billions in cash. Some are wary of the cash, though, …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Maybe the Mississippi Lime Isn't So Bad After All

Leave a comment

By Matt DiLallo, The Motley Fool

Filed under:

When Chesapeake Energy sold part of its stake in the Mississippi Lime for well below what it was believed to be worth, it was taken as a sign to the market that maybe the play wasn’t panning out. That’s what happens when you previously tell investors the land was worth three times the amount you ended up getting in the joint venture sale. Given the latest news out of the Mississippi Lime it would appear that Chesapeake is wrong about the play, again.

As part of a broad strategy to secure domestically produced crude oil, Phillips 66 signed an agreement with Magellan Midstream Partners to access the oil coming out of the Mississippi Lime. While a bulk of the company’s recent deals involved crude oil being shipped by rail, this deal will feature crude oil being shipped by pipeline. Once the Magellan pipeline project is complete early next year, 20,000 barrels of oil per day will be sent to Phillips 66 Ponca City refinery in Oklahoma.

In addition to the oil from Magellan’s pipeline, Phillips 66 is investing in its own transportation infrastructure to secure an another 40,000 barrels of Mississippian oil per day for the same refinery. As you can see in the map, Ponca City is located very close to the Mississippi Lime, which is ideal for keeping transportation costs down. 

Source: Phillips 66 Investor Presentation

While securing cheaper crude is great for the bottom line at Phillips 66, it’s also great news for SandRidge Energy . Investors have punished the company’s shares over the past few years as it’s made several debt-fueled bets that went bad. Its latest foray is an all-in investment on its Mississippi Lime acreage, so a Phillips 66 stamp of approval on the play is nice to see. 

SandRidge, which is by far the biggest operator in the play, has nearly 700 wells drilled and more than 30 rigs currently running. For some context, Chesapeake has drilled the second-largest number of wells, but it’s less than half the amount that SandRidge has. Chesapeake and its new Chinese partner are unlikely to catch up anytime soon with just eight rigs running; in fact, the Devon Energy has the second-highest rig count at 10 rigs. Both Devon and Chesapeake have focused their drilling dollars elsewhere, while SandRidge has doubled down on the Mississippian. 

SandRidge has just under 2 million net acres in the Mississippian and sees the potential for nearly 11,000 future drilling locations. According to the company, that equates to an 18-year drilling inventory. That’s big-time growth, and the movement of Phillips 66 to secure some of the play’s production would seem to indicate that it sees a lot of value to its business in the play being developed. SandRidge could be on the cusp of something big, especially if it can shed its reputation of a poor performer. 

The Phillips 66 deal to secure Mississippi Lime crude oil certainly bodes …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

2 Surprising Takeways From the Chesapeake-Sinopec Deal

Leave a comment

By Arjun Sreekumar, The Motley Fool

Filed under:

Last month, Chesapeake Energy agreed to sell half of its undivided interest in a substantial portion of its acreage in the Mississippi Lime formation to Chinese oil giant Sinopec .

The transaction is the latest in a series of asset sales that the struggling natural gas producer has conducted since last year. With its precarious debt situation exacerbated by depressed prices for natural gas, the company continues to face a daunting funding gap for the year.

Though the Sinopec joint venture will bring in $1.02 billion in cash, of which the majority will be received upon closing, many analysts have pointed to the deal’s disappointing metrics. One of the biggest letdowns was the fact that Chesapeake received a little less than $2,400 per acre for its Mississippian acreage – a fraction of the value the company said the land was worth in a presentation last year.

But beyond the much lower than expected price, there are two other aspects of the deal that are both interesting and revealing. Let’s take a look at both and then conclude with ways to invest around the latter theme.

No drilling carry
As Morningstar analyst Mark Hanson points out, the Chesapeake-Sinopec deal marks the first joint venture transaction that Chesapeake has ever done without a drilling carry. The term “drilling carry” refers to an accounting arrangement often used in oil and gas joint ventures, whereby one company acquires a working interest in another company’s oil and gas property and agrees to fund drilling and other expenses related to that property for a predetermined length of time.

Consider Chesapeake‘s transaction with another major Chinese oil company a few years ago. In that deal, which involved the use of a drilling carry, China‘s largest energy producer, CNOOC , purchased a one-third undivided interest in a portion of Chesapeake’s net leasehold acreage in the Eagle Ford Shale. 

Under the terms of the deal, Chesapeake remained the operator of the project and was responsible for all leasing, drilling, completion, operations, and marketing activities related to the project. However, subject to Chesapeake paying CNOOC an agreed upon $1.08 billion in cash at closing, CNOOC agreed to finance 75% of Chesapeake’s share of drilling and completion expenses.

Not only is the absence of a drilling carry a departure from typical operating procedure for Chesapeake, but also for Sinopec. In previous transactions, the Chinese state-owned oil giant has often made an initial, upfront cash payment and opted to pay the remainder in the form of a drilling carry.

For instance, last year Sinopec acquired a third of Devon Energy‘s equity in shale gas properties located in the Niobrara, Utica, and Tuscaloosa Marine shales, as well as assets located in the Mississippian and the Michigan basin. The acquisition, which cost Sinopec almost $2.5 billion, made use of a drilling carry, allowing Sinopec to fund Devon’s drilling expenses over a defined period of time.

Sinopec’s motives
The Chesapeake-Sinopec transaction was also revealing in highlighting …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Do You Live in a Top-5 Oil-Producing State?

Leave a comment

By Aimee Duffy, The Motley Fool

Filed under:

Yesterday, the Energy Information Administration, or EIA, published a brief post about North Dakota‘s continued growth in oil production. The state routinely makes headlines for its black gold, low unemployment, and lack of available real estate. All of the talk about North Dakota makes now a good time to step back and look at how the oil story is progressing in the rest of the United States‘ top oil-producing states: Oklahoma, Alaska, California, and Texas. Together they produce more than 60% of all of America’s oil.

First, some stats
The U.S. produced roughly 7.03 million barrels of oil per day by the end of last December. It is important to note that the EIA‘s definition of crude oil may not match exactly with another nation’s definition of crude oil.

Of that 7.03 million bpd, Texas produced 2.22 million bpd to take the title of top oil-producing state. Here is how the other states shake out:

Source: EIA 

It is important to remember that despite all of the hoopla over U.S. production, Alaska and California have both watched their oil production decline over the last five years.

5. Oklahoma
The Sooner State was averaging 262,000 barrels per day by the end of last year. Oil producers there focus on the Mississippi Lime formation, and are now beginning to target the thicker layers of the Woodford Shale. The Woodford was traditionally a gas play, but companies like Continental Resources are targeting certain sections hoping to find oil instead. Continental increased its acreage in the play 113% last year.

Oklahoma was voted the No. 1 place in the world for oil and gas investment by the Fraser Institute last year.

4. California
From an outsider’s perspective, California has arguably the most interesting oil history of any of the states on this list. Battles over black gold and pollution, an on-again, off-again offshore policy, and historic oil spills help explain why the state’s production continues to decline in the face of what some are calling unprecedented reserves. California is home to the Monterey Shale, which many — including the federal government — believe holds up to 15.4 billion barrels of crude oil. The geology is tricky in California, and as oil companies try to figure out the play’s true potential some, like Chevron, have already written it off.

3. Alaska
Production in our northernmost state has been falling for quite some time, dropping 7.3% two years ago, and 6.7% last year. Alaska is home to Prudhoe Bay, the nation’s largest oil field. Prudhoe is old and tired, and though BP has worked wonders getting it to produce far longer than most anticipated, it is not the field it once was. In an attempt to entice oil producers to reinvest and spur production increases again, Alaskan governor Sean Parnell is attempting to introduce legislation to cut taxes on oil producers by some $1.7 billion. ConocoPhillips and ExxonMobil also have …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Which Asset Will Chesapeake Sell Next?

Leave a comment

By Arjun Sreekumar, The Motley Fool

Filed under:

Following a recent joint venture agreement with Chinese oil company Sinopec , Chesapeake Energy is back to contemplating which asset it will part with next, as the company seeks to plug a sizable funding gap.

Last month, the ailing natural gas producer announced that it would sell half its interest in some 850,000 of its net leasehold acres in the Mississippi Lime to Sinopec. The metrics of the deal came as a major disappointment, with Chesapeake set to receive less than $2,400 per acre for its assets – less than a third of what the company said the land was worth in a presentation last year.

With that deal wrapped up, Chesapeake is hoping for more favorable terms on future asset sales. The company’s onerous debt situation, which has pushed its cost of capital higher, makes it all the more urgent to whittle down its funding gap as quickly as possible.

Looking ahead, Chesapeake could sell parts of its undeveloped acreage in plays such as the Eagle Ford, the Utica, the Marcellus, the Haynesville, and the Powder River/DJ Basin. Let’s take a closer look at which of these assets might be next to go.

Potential gassy assets up for sale
Analysts at JP Morgan upgraded Chesapeake in January, suggesting that the company may have another major asset sale opportunity “up its sleeve.” In a research note, the bank highlighted the company’s Marcellus and Haynesville assets as prime candidates for divestiture.

In the gassy Haynesville Shale play of northwest Louisiana and East Texas, Chesapeake holds the title of largest leaseholder, with roughly 530,000 net acres, of which 195,000 net acres are prospective for the Bossier Shale, a formation that lies directly above the Haynesville.

And in the Marcellus Shale, Chesapeake is also the largest leasehold owner with 1.8 million net acres under its belt. The majority of this acreage – about 1.5 million – is in the northern dry gas portion of the play, while the remaining acreage is in the southern “wet gas” portion of the play. The company currently has five rigs operating in the dry gas portion and three rigs operating in the wet gas portion.

Experts think Marcellus assets next to go
In considering future asset sales, it would make more sense for Chesapeake to part with a large block of undeveloped acreage, since selling producing acreage by itself would not only lead to a sharp reduction in cash flow, but also wouldn’t be accretive to multiples, according to a recent note by TPH Energy Research.

Given these criteria, TPH analysts believe the Marcellus is likely to be the next gassy asset to go. They estimate that Chesapeake’s acreage in the Marcellus could fetch $8 billion before tax or $6.4 billion after tax. While this would cover the company’s funding gap for the year, it would have negative consequences for Chesapeake’s cash flow and aggregate production.

TPH estimates that a sale of Chesapeake’s Marcellus assets would lower 2013 cash flow by …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Did Chesapeake Get Ripped off in the Sinopec Deal?

Leave a comment

By Arjun Sreekumar, The Motley Fool

Filed under:

Over the past year or so, Chesapeake Energy has been busy selling off several of its oil and gas assets, as the nation’s second-largest natural gas producer tries to raise much-needed cash.

It recently sold off some of its interest in a sizable portion of its Mississippi Lime acreage to a major Chinese oil company. Though the deal brought in a little over $1 billion, the price Chesapeake received per acre was just a fraction of what the company said the acreage was worth last year.

This raises some serious concerns. Did Chesapeake get ripped off? Or does the transaction simply serve as a reminder that beggars can’t be choosers, or distressed sellers can’t expect to receive a desirable price?

Sinopec-Chesapeake joint venture
Last month, Chesapeake struck a deal with China Petrochemical Corp , otherwise known as Sinopec, that will give the Chinese energy producer a 50% interest in a substantial chunk of the company’s acreage in the Mississippi Lime formation.

Under the terms of the agreement, Sinopec will be getting a 50% stake in some 850,000 net acres controlled by Chesapeake, which comes out to a price per acre of less than $2,400 – less than a third of the $7,000-$8,000 price range that Chesapeake claimed the land was worth in a presentation last July.

The transaction price appears even more underwhelming when you consider that the acreage Chesapeake is parting with includes producing wells and a large amount of booked reserves. Production from the 850,000 net acres averaged roughly 34,000 barrels of oil equivalent per day in the fourth quarter, of which 45% was oil, 46% natural gas, and the remaining 9% was natural gas liquids production. According to Chesapeake’s year-end estimates, the land contains net proved reserves totaling about 140 million barrels of oil equivalent.

A poor showing for Chesapeake
While I wasn’t expecting Chesapeake to receive the lofty per-acre price that the company claimed the acreage to be worth, the fact that it got just a third of the price it was expecting is a bit surprising, especially considering that Aubrey McClendon arranged front row seats for Sinopec Chairman Fu Chengyu at game two of the NBA Finals last June. Here’s a picture of him at Chesapeake Energy Arena in Oklahoma City (that’s him to the right of Derek Fisher).

It’s a little puzzling that McClendon couldn’t use his charm to convince the Sinopec chairman to fork over at least a few hundred more dollars more per acre for the Mississippian assets. I mean, c’mon, from $7,000-$8,000 per acre to just under $2,400 per acre? For acreage that was producing 34,000 barrels of oil equivalent per day in the fourth quarter? That’s a pretty sorry showing. But maybe the Sinopec chairman’s just not a big fan of basketball.

Distressed prices for a distressed seller
Even compared to previous Mississippi Lime land sales, the per-acre price Chesapeake received appears to be both undeserved and an outlier. Consider SandRidge …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Chesapeake Energy Corporation Seeks Declaratory Judgment with Respect to Ability to Call 6.775% Seni

Leave a comment

By Business Wirevia The Motley Fool

Filed under:

Chesapeake Energy Corporation Seeks Declaratory Judgment with Respect to Ability to Call 6.775% Senior Notes Due 2019

OKLAHOMA CITY–(BUSINESS WIRE)– Chesapeake Energy Corporation (NYS: CHK) today announced that it is seeking a declaratory judgment in the United States District Court for the Southern District of New York with respect to redeeming the Company’s 6.775% Senior Notes due 2019 (“the Notes”) at par.

Specifically, the Company is requesting the Court to confirm that a notice to redeem issued on or before March 15, 2013, as specified in the governing indenture, will be timely and effective to redeem the Notes at par, with payment to be made 60 days after such notice, pursuant to the Special Early Redemption provision of the Notes. Chesapeake desires to redeem the Notes as part of a broader refinancing of its outstanding debt obligations.

The Company is also requesting a prompt preliminary order from the Court that a notice issued by March 15 for a Special Early Redemption at par cannot be construed to be a notice to redeem under the “make-whole” provision of the indenture in the event the Court does not determine that the March 15 notice is timely for a redemption at par. If the Court does not issue either the preliminary order (assuring that the proposed March 15 notice will not under any circumstances constitute a notice of redemption at the make-whole price) or the requested declaratory judgment (that the March 15 notice is timely for purposes of a Special Early Redemption at par), such notice would have no effect and the Notes will remain outstanding.

The defendant in the action initiated today by Chesapeake is the indenture trustee for the Notes, The Bank of New York Mellon Trust Corporation, N.A.

This announcement does not constitute an offer to purchase or a solicitation of an offer to sell any securities.


Chesapeake Energy Corporation (NYSE: CHK) is the second-largest producer of natural gas, a Top 15 producer of oil and natural gas liquids and the most active driller of new wells in the U.S. Headquartered in Oklahoma City, the company’s operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the U.S. Chesapeake owns leading positions in the Eagle Ford, Utica, Granite Wash, Cleveland, Tonkawa, Mississippi Lime and Niobrara unconventional liquids plays and in the Marcellus, Haynesville/Bossier and …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Sinopec to buy stake in Chesapeake assets for $1.02 billion: source

Leave a comment
Chinese New Year lantern installation is displayed outside Sinopec gas station in Hong Kong

(Reuters) – China Petroleum & Chemical Corp (Sinopec) , Asia's largest oil refiner, will buy a 50 percent stake in Chesapeake Energy Corp's Mississippi Lime oil and gas properties in Oklahoma and Kansas for $1.02 billion, a Sinopec source said. Chesapeake, the second-largest gas producer in the United States, has about 2.1 million net acres of leasehold in the Mississippi Lime region. Chesapeake could not be reached for comment. …

…read more
Source: FULL ARTICLE at Yahoo Business