Chesapeake Energy Corp. announced on Monday that it has reached an agreement to sell its remaining Eagle Ford assets to SilverBow Resources Inc. for a total of $700 million. The deal is set to be finalized in 2023, bringing the total proceeds from the Eagle Ford exit to over $3.5 billion.
Details of the Deal
Under the agreement, Chesapeake will sell approximately 42,000 new acres and around 540 wells located in Dimmit and Webb counties in Texas. This portion of the asset is known for its condensate-rich properties. Included in the sale are the associated property, plant, and equipment.
Chesapeake’s decision to divest these assets will enable the company to shift its focus towards its Marcellus and Haynesville positions, as stated by CEO Nick Dell’Osso.
Production and Financials
During the second quarter, the average net daily production from these properties amounted to around 29,000 barrels of oil equivalent per day. This generated approximately $50 million of EBITDAX.
Upon closing the deal, Chesapeake will receive $650 million, with the remaining $50 million to be paid within one year. Furthermore, SilverBow has agreed to make an additional contingent payment of $25 million if oil prices average between $75 and $80 a barrel WTI NYMEX. Alternatively, if prices exceed $80 on average in the year following the closure, SilverBow will pay $50 million.
Utilizing Proceeds
Chesapeake plans to utilize the funds received from this sale to reinforce its balance sheet and execute share buybacks.
Stock Performance
While Chesapeake’s stock was not active in premarket trading, it has experienced a decline of 9% year to date. In comparison, the S&P 500 index has gained 16% during the same period.
