Chesapeake Energy to Sell Fayetteville Shale Play Assets

Chesapeake Energy Corp. of Oklahoma City announced Monday that it would sell all its Fayetteville Shale assets, as well as its equity investments in companies Frac Tech Holdings LLC of Cisco, Texas, and Chaparral Energy Inc. of Oklahoma City.

According to a company news release, the sale is a part of Chesapeake's 2011-2012 strategic and financial "25/25 Plan," which refers to the company's plan to reduce 25 percent of its debt by 2012. The sale is expected to bring the company proceeds of $5 billion.

Chesapeake plans to use the money from the sale, along with proceeds from its previously announced Niobrara joint venture with China National Offshore Oil Corp., to retire up to $3 billion of its shorter-dated senior notes and to reduce borrowings under its revolving bank credit facility, the company said.

Weak prices of natural gas in the Fayetteville Shale likely played into the Chesapeake's decision to sell. For the third quarter of 2010, the company reported prices of $3.07 per mcf of natural gas. On Sept. 30, the company also reported nearly $15 billion in long-term debt.

Petrohawk Energy Corp. of Houston recently sold its Fayetteville Shale assets as well. In December, the company announced that it had sold its Fayetteville Shale assets to XTO Energy Inc., a subsidiary of Exxon Mobil, for $575 million.