Chesapeake Energy Corporation Selling Natural Gas Compression Assets for $520 Million

Today Chesapeake Energy (NYSE: CHK  ) announced it has come to agreement with two companies, Access Midstream Partners (NYSE: ACMP  ) and Exterran Partners (NASDAQ: EXLP  ) , to sell 437 of its midstream compression units for $520 million, and the sales are expected to close by the end of the second quarter.

Chesapeake will sell 103 compression units to Access Midstream Partners for $160 million. Those units are used to service gathering systems in West Virginia, Pennsylvania, and Ohio. The natural gas compression assets were previously leased from Chesapeake Energy subsidiary MidCon Compression in the Utica and Marcellus Shale regions.

"These assets fit the Access Midstream business model extremely well," noted the CEO of Access Midstream Partners, Mike Stice, in its press release announcing the purchase. "Internalizing a portion of our compression expense is consistent with maintaining strong visibility to our cash flows." In addition, the company said the purchase allows it to insource a significant cost of its business model, while also adding potential growth opportunities.

Exterran Partners noted in its announcement it will purchase 334 units across Arkansas, Louisiana, Oklahoma, Texas, and Wyoming for $360 million. In addition, as a result of the purchase Exterran and Access have entered into a contract in which Exterran will provide Access with compression services in regions including the Permain Basin, Eagle Ford formation and other shale positions over the next seven years.

"With this transaction, we continue to deliver on our strategy of growing our core contract operations business," said the CEO of Exterran Partners, Brad Childers, in  statement. "Because the units we are acquiring are highly standardized and average less than five years in age, the acquisition is also consistent with our strategy to modernize and standardize our existing fleet."

For its part, Chesapeake said it continues to streamline its portfolio to focus on core assets. "These sales ... will generate more than $500 million toward improving our balance sheet, while having minimal impact on our 2014 cash flow guidance," CFO of Chesapeake Energy, Domenic J. Dell'Osso, was quoted as saying.

link


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2859680, ~/Articles/ArticleHandler.aspx, 11/25/2014 8:48:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement