Chesapeake Energy Corporation Announces Closing of Placement of $750 Million of Preferred Shares in CHK Utica, L.L.C., Completing the Company′s $1.25 Billion Utica Financial Transaction
Chesapeake Energy Corporation (NYSE:CHK) today announced the closing of
the sale of $750 million of perpetual preferred shares in its wholly
owned, unrestricted subsidiary, CHK Utica, L.L.C. The subsidiary owns
approximately 700,000 net leasehold acres within an area of mutual
interest in the Utica Shale play in 13 counties primarily in eastern
Ohio (the 'CHKU AMI?). Chesapeake has retained all the common interests
in CHK Utica.
This closing completes a financial transaction led by EIG Global Energy
Partners ('EIG?) and results in total proceeds of $1.25 billion of sales
of CHK Utica preferred shares. As previously announced on November 3,
2011, EIG purchased $500 million of perpetual preferred shares in CHK
Utica. The additional $750 million of preferred shares have been placed
with: a co-investment vehicle managed by EIG consisting of limited
partners and qualified EIG employees; GSO Capital Partners LP, an
affiliate of the Blackstone Group (NYSE:BX); and Magnetar Capital, a
private asset management firm.
The CHK Utica preferred shares issued in the second closing have
identical terms to the initial shares sold to EIG, including an initial
annual distribution of 7%, payable quarterly. Chesapeake has retained an
option exercisable prior to October 31, 2018 to repurchase the preferred
shares for cash in whole or in part at any time at a valuation expected
to equal the greater of a 10% internal rate of return or a return on
investment of 1.4x. Investors in the combined $1.25 billion of CHK Utica
preferred shares will also proportionately receive a 3% overriding
royalty interest in the first 1,500 net wells drilled on CHK Utica′s
leasehold, which is the equivalent of an approximate 0.45% overriding
royalty interest across Chesapeake′s projected 10,000 inventory of net
wells to be drilled. Chesapeake′s average net revenue interest on its
Utica Shale leasehold is approximately 83%, which compares favorably to
net revenue interests in the Haynesville, Barnett and Eagle Ford shale
plays of approximately 75%.
As previously announced, part of this financial transaction includes a
commitment by Chesapeake to drill a minimum of 50 net wells per year
through 2016 in the CHKU AMI, up to a minimum cumulative total of 250
net wells, for the benefit of CHK Utica. Chesapeake believes it will
have considerable operating and financial flexibility in fulfilling the
drilling commitment because the company′s planned Utica Shale drilling
program for the years ahead involves a significantly higher rig count
than the approximate 10-rig drilling program required by the terms of
the CHK Utica preferred share investment. In addition, the company′s
pending Utica industry joint venture, if completed as proposed, will
fund 60% of Chesapeake′s share of drilling and completion costs, up to
$1.5 billion in the joint venture area of mutual interest, which lies
entirely within the CHKU AMI.
ABOUT CHESAPEAKE:
Chesapeake Energy Corporation is the second-largest producer of
natural gas, a Top 15 producer of oil and natural gas liquids and the
most active driller of new wells in the U.S.Headquartered
in Oklahoma City, the company's operations are focused on discovering
and developing unconventional natural gas and oil fields onshore in the
U.S.Chesapeake owns leading positions in the Barnett,
Haynesville, Bossier, Marcellus and Pearsall natural gas shale plays and
in the Granite Wash, Cleveland, Tonkawa, Mississippi Lime, Bone Spring,
Avalon, Wolfcamp, Wolfberry, Eagle Ford, Niobrara, Three Forks/Bakken
and Utica unconventional liquids plays.The company has
also vertically integrated its operations and owns substantial
midstream, compression, drilling, trucking, pressure pumping and other
oilfield service assets directly and indirectly through its subsidiaries
Chesapeake Midstream Development, L.P. and Chesapeake Oilfield Services,
L.L.C. and its affiliate Chesapeake Midstream Partners, L.P. (NYSE:CHKM).Chesapeake′s stock is listed on the New York Stock Exchange under
the symbol CHK.Further information is available at www.chk.comwhere Chesapeake routinely posts announcements, updates, events,
investor information, presentations and press releases.
FORWARD-LOOKING STATEMENTS:
This news release includes 'forward-looking statements? that give
Chesapeake′s current expectations or forecasts of future events. They
include the execution of definitive documentation and closing of the
announced joint venture transaction for a portion of its Utica Shale
leasehold and Chesapeake′s planned Utica Shale drilling activity.
Although Chesapeake believes the expectations and forecasts reflected in
these forward-looking statements are reasonable, it can give no
assurance they will prove to have been correct. The joint venture may
not be completed as described or at all and drilling plans may change. .
Chesapeake cautions you not to place undue reliance on its
forward-looking statements, which speak only as of the date of this news
release, and undertakes no obligation to update this information.
The CHK Utica preferred shares have not been, and will not be,
registered under the Securities Act of 1933 or any state securities laws
and may not be offered or sold in the United States absent registration
or an applicable exemption from the registration requirements of the
Securities Act of 1933 and applicable state laws.
This news release shall not constitute an offer to sell or a
solicitation of an offer to purchase the CHK Utica preferred shares or
any other securities, and shall not constitute an offer, solicitation or
sale in any state or jurisdiction in which such an offer, solicitation
or sale would be unlawful.
Chesapeake Energy Corporation
Investors:
Jeffrey
L. Mobley, CFA, 405-767-4763
jeff.mobley@chk.com
or
John
J. Kilgallon, 405-935-4441
john.kilgallon@chk.com
or
Media:
Michael
Kehs, 405-935-2560
michael.kehs@chk.com
or
Jim
Gipson, 405-935-1310
jim.gipson@chk.com
