Chesapeake Midstream Partners, L.P. Agrees to Acquire Gas Gathering Assets in Haynesville Shale from Chesapeake Energy Corpor...
December 16 2010 - 4:25PM
Business Wire
Chesapeake Midstream Partners, L.P. (NYSE:CHKM) today announced
it has agreed to acquire the Springridge natural gas gathering
system and related facilities in the Haynesville Shale from
Chesapeake Midstream Development, L.P., a wholly owned subsidiary
of Chesapeake Energy Corporation (NYSE:CHK) (“Chesapeake”), for
cash consideration of $500 million.
The Partnership will acquire Chesapeake’s 100% ownership
interest in the Springridge system which consists of 220 miles of
gathering pipeline in Caddo and De Soto Parishes, Louisiana. The
average throughput on the system during the 2010 third quarter was
approximately 400 million cubic feet per day, with significant
future exposure to third-party volume. The acquisition allows the
Partnership to broaden its operating footprint and provides access
to the Haynesville Shale, which is one of the largest and lowest
cost natural gas fields in the United States.
At closing, the Partnership will simultaneously enter into a
10-year, 100% fixed-fee gas gathering agreement with Chesapeake
which includes a significant acreage dedication, annual fee
redetermination and a minimum volume commitment. The combination of
basin diversification, increased footprint, access to third-party
volumes, low risk contractual terms and anticipated growth
prospects makes the acquisition an attractive addition to the
Partnership’s portfolio.
The acquisition will be financed with a draw on the
Partnership’s revolving credit facility of approximately $250
million plus $250 million of cash on hand. Following the
transaction, the Partnership will have approximately $500 million
of additional borrowing capacity on its credit facility. The
acquisition is expected to close before December 31, 2010.
Terms of the transaction were unanimously approved by the Board
of Directors of the Partnership’s general partner and by the
Board’s Conflicts Committee, which is comprised entirely of
independent directors. The Conflicts Committee engaged Tudor,
Pickering, Holt & Co. Securities, Inc. to act as its financial
advisor and Richards, Layton & Finger, P.A. to act as its legal
advisor.
Management Comments
J. Mike Stice, Chesapeake Midstream Partners’ Chief Executive
Officer, commented, “We are pleased to deliver an attractive
drop-down within six months of our IPO. We expect the acquisition
to be immediately accretive to distributable cash flow and believe
these assets, located in one of the premier cost-advantaged
unconventional plays, have significant potential for organic
growth. This transaction is consistent with our best-in-class
business model which is based on long-term contractual
arrangements.”
Conference Call Information
The Partnership has scheduled a conference call to discuss the
acquisition and an outlook for 2011 on Friday, December 17, 2010 at
9:00 a.m. EST. Presentation materials to be referenced during the
discussion will be available just prior to the call and can be
accessed by going to the main page of the Chesapeake Midstream
Partners website at www.chkm.com. The telephone number to access
the conference call is 719-325-2338 or toll-free
800-890-0881. The passcode for the call is 4684980.
We encourage those who would like to participate in the call to
dial the access number between 8:50 and 9:00 a.m. EST. For those
unable to participate in the conference call, a replay will be
available for audio playback from 12:00 p.m. EST on December 17,
2010 through 12:00 p.m. EST on December 31, 2010. The number to
access the conference call replay is 719-457-0820 or
toll-free 888-203-1112. The passcode for the replay is
4684980. The conference call will also be webcast live on
the Internet and can be accessed by going to the "Events"
subsection of the "Investors" section of the Partnership’s website.
An archive of the conference call webcast will also be available on
the website.
This press release includes forward-looking statements.
Forward-looking statements give our current expectations or
forecasts of future events. They include but are not limited to
throughput volumes, revenues, net income, adjusted ebitda and
distributable cash flow, as well as other statements concerning our
business strategy and plans and objectives for future operations.
We caution you not to place undue reliance on our forward-looking
statements, which speak only as of the date of this release, and we
undertake no obligations to update this information. Although we
believe the expectations and forecasts reflected in these and other
forward-looking statements are reasonable, we can give no assurance
they will prove to be correct. They can be affected by inaccurate
assumptions or by known or unknown risks and uncertainties. Factors
that could cause actual results to differ materially from expected
results are described under “Risk Factors” in our prospectus dated
July 28, 2010 and filed with the Securities Exchange Commission on
July 30, 2010. These factors include the ability to consummate the
transactions contemplated by this press release.
Chesapeake Midstream Partners, L.P. is one of the industry’s
largest midstream master limited partnerships and owns, operates,
develops and acquires natural gas gathering systems and other
midstream energy assets. Headquartered in Oklahoma City, the
Partnership's operations are currently focused on the Barnett Shale
and Mid-Continent regions of the U.S. Further information is
available at www.chkm.com, where the Partnership
routinely posts announcements, updates, events, investor
information and presentations and all recent press
releases.
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