Source: Chesapeake Energy

Today is a busy deal day for the Marcellus Shale. Chesapeake Energy (CHKA.Q) is selling 22,000 net acres and 12 developed wells in the southern Pennsylvania portion of the play to Rice Energy (NYSE: RICE) for $325 million. Meanwhile, Warren Resources (NASDAQ: WRES) is buying $352.5 million in Marcellus Shale assets. Let's drill down into these two big Marcellus Shale deals.

Chesapeake Energy continues to pare down to the Marcellus core
Over the past year Chesapeake Energy has been paring its Marcellus Shale acreage down to a focus on what it considers its core position. Today's sale of 22,000 net acres to Rice Energy is just another step in that direction.

Chesapeake Energy held more than 250,000 net acres in the southern Marcellus Shale, which is detailed on the map in the below slide.

Source: Chesapeake Energy Investor Presentation (link opens a PDF) 

The acreage that Chesapeake Energy is selling to Rice Energy is in the southwestern corner of that state that as the map above notes is adjacent to acreage Rice Energy currently owns. That makes this deal a real strategic fit for Rice Energy as it expands its footprint in this portion of the play. It also expands Rice Energy's risked drilling inventory by 50% as it adds seven years' worth of drilling inventory for the company.

Meanwhile, the deal gives Chesapeake Energy a nice exit to this non-core portion of its acreage as it values the acreage at more than $15,000 per acre. That certainly fits within the value the company sees for its acreage in this portion of the Marcellus. Meanwhile, with more than 225,000 net acres upon which to drill, Chesapeake Energy continues to have more land than it can develop when its only running a couple of rigs each year.

Warren turns to the Marcellus to grow
Today's second big Marcellus Shale deal saw Warren Resources acquire $352.5 million in Marcellus Shale assets. This deal is focused on the northern portion of the Marcellus Shale in Wyoming County, which is just to the south of some of the top performing wells in the play. It's also close by the "core-of-the-core" Marcellus Shale that Chesapeake Energy is focusing most of its attention on as it's operating five to seven rigs in this part of the play versus one or two rigs in the southern portion of the play. As the following slide notes most of Chesapeake Energy's rigs in this part of the play are in Wyoming County, which is where Warren Resources is acquiring its acreage.

Source: Chesapeake Energy Investor Presentation

Warren Resources sees its deal adding a new core area for the company as the Marcellus Shale will join its core operations in California and Wyoming. The company sees its Marcellus Shale position generating substantial cash flow that will fund its future drilling plans in the play, which should fuel gains for the company in the years ahead. 

Investor takeaway
The Marcellus Shale saw two big deals announced today, both from companies focused on increasing production in the play. While Chesapeake Energy was a notable seller, the company still has more acreage than it can drill and it found a willing buyer in Rice Energy that wanted to extend its position in the southwest corner of Pennsylvania. Meanwhile, Chesapeake Energy's plan is to focus most of its rigs on the northern portion of the play, which is where we see Warren Resources now joining it. Bottom line here is that the Marcellus Shale is still an important energy play, even for Chesapeake Energy which has been focusing a lot of its attention on drilling for liquids elsewhere in the U.S.