Chesapeake Monetizes $2 Billion In Three Deals

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To acquire 3.75% ORRI in first 1,000 wells of formed subsidiary CHK Cleveland Tonkawa LLC targeting Cleveland & Tonkawa plays in Roger Mills & Ellis cos., OK.

Chesapeake Energy Corp., Oklahoma City, (NYSE: CHK) has sold three oil and gas deals for a total of approximately $2.6 billion in cash, launching the first tranche of a total $8- to $10 billion in total asset sales planned for 2012.

A purchasing investment group led by GSO Capital Partners LP, an affiliate of the Blackstone Group, New York, (NYSE: BX), and including TPG Capital, Magnetar Capital and EIG Global Energy Partners, has acquired shares of a newly formed unrestricted, non-guarantor consolidated subsidiary of Chesapeake, CHK Cleveland Tonkawa LLC, for $1.25 billion.

CHK C-T owns approximately 245,000 net leasehold acres in the Cleveland and Tonkawa unconventional liquids-rich, tight-sand plays in Roger Mills and Ellis counties, Oklahoma. Chesapeake has retained all the common equity interests in CHK C-T. The buyers will gain a 3.75% overriding royalty interest in the first 1,000 new net wells to be drilled on CHK C-T leasehold and certain wells contributed at closing for proceeds of $1.25 billion.

The holders of CHK C-T preferred shares are entitled to receive an initial annual distribution of 6%, payable quarterly. Chesapeake has retained an option exercisable prior to March 31, 2019, to repurchase the preferred shares for cash in whole or in part at any time, at a valuation equal to the greater of a 9% internal rate of return or a return on investment of 1.35 times.