Chesapeake Peels Off Mississippi Lime Asset As It Continues Big Sell Off

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Close Date
Estimated Price
$300.0MM
Description

Acquired gas gathering and processing assets in the Mississippi Lime.

Another piece of Chesapeake Energy Corp. (NYSE: CHK), has been chipped as the company continues to unload up to $7 billion worth of assets.

Chesapeake closed on Aug. 1 a deal with SemGroup Corp. (NYSE: SEMG) that cuts loose Chesapeake’s gas gathering and processing assets in the Mississippi Lime play for $300 million in cash.

SemGroup, based in Tulsa, said about $125 million of additional capital expenditures are needed to complete the Rose Valley plants I and II, as well as additional capital for to future well connects. The plants include 400 million cubic feet per day (MMcf/d) of processing capacity in a core producing area.

The acquisition includes:

  • 200 miles of gathering pipeline;
  • Rose Valley I plant: a 200 MMcf/d cryogenic processing plant, expected to be operational first quarter 2014;
  • Rose Valley II plant: a 200 MMcf/d cryogenic processing plant, expected to be online in first quarter 2016; and
  • About 540,000 net acres in the core of the Mississippi Lime play; - A 20-year, 100% fee-based, gas gathering and processing agreement.

“We are pleased to add all of these key assets to SemGroup's continued story of growth,” said Norm Szydlowski, president and chief executive officer of SemGroup. “This purchase positions us to expand our presence in a highly attractive area and provides future drop down inventory for Rose Rock Midstream.” CT Capital, LLC and Citi acted as financial advisors to SemGroup.The deal to acquire Chesapeake’s Mid-America Midstream Gas Services LLC was initially announced May 1.

Chesapeake has spent 2013 selling off properties to fund what it considers core assets and to pay down debt. As of July, the company had signed agreements to sell or closed on $3.6 billion.

On July 3, Chesapeake sold assets in the Northern Eagle Ford shale and Haynesville shale to EXCO Operating Company LP, a subsidiary of EXCO Resources Inc. (NYSE: XCO), for aggregate proceeds of about $1 billion. The transaction is expected to close in the third quarter of 2013. The company said the sales would enable Chesapeake to fully fund it 2013 capital expenditure budget.