Last month Chesapeake Energy (NYSE:CHK) announced it was selling 162,000 net acres above the Marcellus Shale to Southwestern Energy (NYSE:SWN) at a fire-sale price. The $93 million deal, which enabled Southwestern to double down on its Marcellus acreage, represented just a pittance of the $4 billion-$7 billion in asset sales Chesapeake is planning on this year.
Just a week after, Chesapeake unloaded another slug of Marcellus acres, this time to EQT (NYSE:EQT). This deal included roughly 99,000 acres of which 67,000 are in the Marcellus and another 32,000 are in the dry gas area of the Utica. Chesapeake will get a bit more money for these acres as the company and its partners pulled in $113 million. Of that purchase price $53 million is allocated to the 10 Marcellus wells that had already been drilled, seven of which won't be turned into sales until the latter half of this year.
It's those wells, and about 25,000 of the acres that interests EQT the most as those acres are within the company's core Marcellus development area. The company said in its press release announcing the deal that the rest of the 42,000 Marcellus acres are unlikely to be developed due to near-term lease expirations or a more scattered footprint. So, when looking at the deal in that context, Chesapeake really just threw them in there to get those acres off its books.
What we're seeing at Chesapeake, instead, is the company's next phase as it trims away at the outliers to focus only on the core of its core assets. This means selling off smaller non-core assets like these two recent Marcellus deals in order to optimize its portfolio and focus its attention.
In fact, these latest assets sales in no way mean the company is waving the white flag and giving up on the Marcellus. Despite slashing its capital budget this year by 39% and spending 86% of that new budget on liquids-rich plays, the Marcellus is still a focus for the company. Of its total capital budget the company is spending 14% between its Marcellus north and south positions.
What it's doing instead is focusing on the core of its core Marcellus acreage. In the dry gas northern Marcellus the company owns 100,000 acres with around 1,000 remaining drilling location in the acreage that it's deemed the core of the core. The company is still currently operating five drilling rigs in that section while it only has three rigs in its wet gas acreage in the southern portion of the Marcellus.
Make no mistake about it, these recent deals were not about funding its capital plans for the year. Instead, these deals are about getting back to its core and focusing its efforts on only its best opportunities. Expect to see similar one-off deals as the company plods on its new path forward to realize the value of the assets it has by ridding itself of those non-core outlier assets that have taken up too much of its attention over the years.