Chesapeake finalizes Eagle Ford basin exit through SilverBow deal.
(Reuters) -U.S. natural gas producer Chesapeake Energy is making waves with its latest announcement. The company revealed on Monday that it will be selling its remaining Eagle Ford assets to SilverBow Resources for a whopping $700 million. This deal marks Chesapeake Energy’s complete exit from the south Texas basin.
Chesapeake Energy’s strategic move to sell its assets in the Eagle Ford basin has proven to be highly lucrative. Including the recent deal with SilverBow Resources, the company has generated total proceeds of over $3.5 billion.
Chesapeake Energy made it clear last year that it no longer considered the Eagle Ford acreage as a core part of its strategy. Instead, the company has shifted its focus to the gas-rich Marcellus and Haynesville shale formations.
In January, Chesapeake Energy sold parts of its operations in the Eagle Ford basin to WildFire Energy for a staggering $1.43 billion. The following month, it also sold some positions to chemical maker INEOS for $1.4 billion.
One of the driving forces behind Chesapeake Energy’s decision to exit the Eagle Ford basin was activist investment firm Kimmeridge Energy Management. The firm has been pushing for a shift towards solely natural gas production.
The assets being sold to SilverBow Resources include approximately 42,000 net acres and about 540 wells located in Dimmit and Webb counties. Additionally, related property, plant, and equipment will also be transferred. These properties have been producing an average net daily production of around 29,000 barrels of oil equivalent (boe) during the second quarter.
SilverBow Resources, on the other hand, is thrilled about the deal. Once the transaction is finalized by the end of this year, it will become the largest public pure-play Eagle Ford operator. The deal is expected to immediately enhance key financial and operating metrics for SilverBow Resources.
The deal structure consists of a $650 million upfront cash payment due at closing, with an additional $50 million deferred cash payment to be made 12 months after the close. Chesapeake Energy also stands to receive up to $50 million in additional contingent cash based on future commodity prices.
Reporting by Arunima Kumar in Bengaluru; Editing by Sriraj Kalluvila
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