Chesapeake Energy makes $1.1B gas sale

Jan. 2, 2008 at 5:43 PM
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OKLAHOMA CITY, Jan. 2 (UPI) -- Chesapeake Energy Corp. said Wednesday it sold future natural gas production in Kentucky and West Virginia to two European companies for $1.1 billion.

The sale to Switzerland's UBS AG and Germany's Deutsche Bank AG subsidiary DB Energy Trading LLC is part of Chesapeake's plan to sell off "mature properties" and reinvest the money in a "low-risk drilling program at anticipated rates of return in excess of 30 percent," Chief Executive Aubrey K. McClendon said in a statement.

The company said it expected to sell "similar packages of mature properties" this year and next "for further proceeds of at least $2 billion."

The current deal gives UBS and DB Energy scheduled quantities of natural gas from Chesapeake's interests in more than 4,000 producing wells over 15 years, with no production costs and taxes.

The sale, which closed Monday, includes about 210 billion cubic feet equivalent of proved reserves and 55 million cubic feet equivalent of current net production, or approximately 2 percent of the company's proved reserves and net production, Chesapeake said.

The company retains drilling rights on the properties.

Oklahoma City's Chesapeake is the largest independent producer and third-largest overall producer of natural gas in the United States, and is the most active U.S. driller of new wells.

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