Chesapeake Midstream Partners, L.P. Agrees to Acquire Gas Gathering Assets in Marcellus Shale from Chesapeake Energy Corp. fo...
December 28 2011 - 4:15PM
Business Wire
Chesapeake Midstream Partners, L.P. (NYSE:CHKM) (“CHKM”) today
announced it has agreed to acquire Appalachia Midstream Services,
L.L.C. (“AMS”), the wholly owned subsidiary of Chesapeake Midstream
Development, L.P. that holds its Marcellus Shale midstream assets,
for total consideration of $865 million. Chesapeake Midstream
Development, L.P. is a wholly owned subsidiary of Chesapeake Energy
Corporation (NYSE:CHK) (“Chesapeake”). The addition of the
Marcellus assets makes CHKM the industry’s largest gathering and
processing master limited partnership as measured by throughput
volume.
Through acquiring AMS, CHKM will own approximately 47% of an
integrated system of assets that consist of approximately 200 miles
of gathering pipeline in the Marcellus Shale, including the
liquids-rich Marcellus South region. Throughput for these assets at
December 15, 2011 was just over one billion cubic feet per day. AMS
operates the assets under 15-year fixed fee gathering agreements
with leading Marcellus natural gas and liquids producers. The
gathering agreements include significant acreage dedications and
annual fee redeterminations that target a mid-teens return on all
invested capital in the acquired assets. Chesapeake has committed
to generating EBITDA of not less than $100 million in 2012 and $150
million in 2013 from the Marcellus assets for the benefit of
CHKM.
The acquisition, which is expected to close by December 30,
2011, will be financed by $600 million of cash drawn from CHKM’s
revolving credit facility and equity consideration of $265 million
(9.8 million CHKM common units), increasing Chesapeake’s limited
partnership ownership of CHKM to 46.1% from 42.3%. On December 20,
2011, CHKM completed an amendment of its credit facility that
increased total borrowing capacity to $1.0 billion.
Terms of the transaction were unanimously approved by the Board
of Directors of CHKM’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, CHKM’s Chief Executive Officer, commented, “We
are excited to expand our footprint into the Marcellus Shale,
further increasing our basin diversification and, more importantly,
exposing us to the increased drilling activity in the liquid-rich
regions in the Marcellus South. With the closing of this
transaction, we will have completed two significant acquisitions
from Chesapeake in just 18 months since our IPO and will have
created the industry’s largest gathering and processing MLP. Given
Chesapeake’s dynamic growth potential and industry-leading
leasehold position in the Lower 48, CHKM expects to pursue a
substantial number of asset dropdowns from Chesapeake in the years
ahead.”
Aubrey K. McClendon, Chesapeake’s Chief Executive Officer,
added, “We are pleased to announce our second gathering asset sale
to CHKM. Combined with our Springridge Haynesville asset sale of
$500 million in December 2010, we have now dropped down gathering
assets of approximately $1.4 billion into CHKM. Combined with the
$1.2 billion Barnett, Permian and Mid-Continent gathering assets
contributed to the formation of CHKM’s predecessor in September
2009, Chesapeake has successfully monetized $2.6 billion of its
extensive midstream asset portfolio at a more attractive valuation
than if these assets had stayed on Chesapeake’s balance sheet.
“These Marcellus assets are a truly unique platform for growth
that will benefit CHKM for decades. An asset of this scale and
quality highlights the significant value CHKM realizes as an MLP
sponsored by the most active driller in the U.S. and the largest
leasehold owner in the Lower 48. We look forward to continuing to
build Chesapeake’s midstream systems in the Haynesville, Eagle
Ford, Greater Anadarko (including the Cleveland, Tonkawa and
Mississippian), Niobrara and Utica plays, all of which will be
available to CHKM for future dropdowns.”
Conference Call Information
A conference call hosted by CHKM’s management to discuss the
acquisition and an outlook for 2012 has been scheduled for Thursday
morning, December 29, 2011 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 CHKM’s
website at www.chkm.com. The telephone number to access the
conference call is 719-457-2662 or toll-free
888-282-4591. The passcode for the call is 2460591.
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 29,
2011 through 12:00 p.m. EST on January 12, 2012. The number to
access the conference call replay is 719-457-0820 or
toll-free 888-203-1112. The passcode for the replay is
2460591. The conference call will also be webcast live on
the Internet and can be accessed by going to CHKM’s website in the
"Events" subsection of the "Investors" section of the website. An
archive of the conference call webcast will also be available on
the website.
Chesapeake Midstream Partners, L.P. (NYSE:CHKM) owns,
operates, develops and acquires natural gas gathering systems and
other midstream energy assets. Upon completion of the
acquisition of Marcellus assets announced today, CHKM will be the
industry’s largest gathering and processing master limited
partnership as measured by throughput volume. Headquartered
in Oklahoma City, CHKM's operations are focused on the Barnett
Shale, Haynesville Shale and Mid-Continent regions of the U.S.
CHKM’s common units are listed on the New York Stock Exchange
under the symbol CHKM. Further information is available
at www.chkm.com where
CHKM routinely posts announcements, updates, events, investor
information and presentations and all recent press
releases.
Chesapeake Energy Corporation (NYSE:CHK) 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 traded on the New
York Stock Exchange under the symbol CHK. Further
information is available at www.chk.com where
Chesapeake routinely posts announcements, updates, events, investor
information, presentations and news releases.
This press release includes forward-looking statements.
Forward-looking statements give our current expectations or
forecasts of future events. They include the closing of the
announced acquisition of Marcellus midstream gathering and
processing assets and the expectation to pursue future asset
acquisitions from Chesapeake. 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. The Marcellus acquisition may not be completed as
described or at all and future acquisitions from Chesapeake are
uncertain. 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 2010 Annual Report on Form 10-K.
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