Chesapeake Energy Corporation (CHK) and its partners have inked a definitive purchase and sale agreement with Rice Energy Inc. (RICE) to vend about 22,000 net acres and 12 developed Marcellus wells in western Greene County, PA. The transaction is valued at about $336 million.
Chesapeake’s move to sell the non-core Marcellus acreage was commended by analysts. The analysts observed that selling production at $16.8 thousand per flowing thousand cubic feet equivalent per day (Mcfe/d) when the c-corp is valued at $9.2 thousand Mcfe/d, is a profitable proposition. They also observed that the 22,000 net acres represents less than 10% of the company’s approximately 250,000 acres position in the play.
Per the current deal, Chesapeake’s south western Marcellus assets are valued at about $4.5 billion, given 330 MMcfe/d of production.
As of Mar 31, 2014, Rice Energy’s deal equates to a 24% increase in the company’s net acreage position and around 152 net risked locations represents a 47% increase in Marcellus inventory of net risked locations. The company expects to begin pad-drilling by the second half of 2015.
The deal, having an effective date of Feb 1, 2014, is projected to close in Aug 2014, subject to customary closing conditions.
Chesapeake remains a very active player in the industry, managing asset portfolio through a combination of acquisitions and disposals. With the biggest inventory of unconventional resource potential than probably any other domestic independent, Chesapeake boasts a leading position among the top unconventional liquids-rich plays, comprising Eagle Ford, Utica, Granite Wash, Cleveland, Tonkawa, Mississippi Lime and Niobrara and in the Marcellus, Haynesville/Bossier and Barnett natural gas shale plays.
At present, Chesapeake carries a Zacks Rank #3 (Hold). Meanwhile, one could consider better-ranked players in the same sector like Magellan Midstream Partners L.P (MMP) and EQT Corp. (EQT), both of which sport a Zacks Rank #1 (Strong Buy).
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