Chesapeake Energy Corporation (NYSE:CHK), the second largest producer oil and natural gas producer in the United States, sold 162 thousand net acres of natural gas properties in Marcellus Shale to Southwestern Energy (NYSE:SWN) for $93 million.
According the Southwestern Energy (NYSE:SWN), it will use its revolving credit facility to fund the transaction, which is expected to close by May 15, 2013. After the completion of the acquisition, the company will own total of 337 thousand net acres in Marcellus Shale.
Steve Mueller, president and chief executive officer of Southwestern Energy (NYSE:SWN) said, “This acquisition of approximately 162,000 net acres is near our existing position and provides Southwestern with even greater exposure to a world class resource where we can further showcase our operational strength.”
According to Mueller, Southwestern Energy (NYSE:SWN) existing assets in Marcellus Shale produce approximately 2MMcf per day from 17 gross wells. He said that the acquisition will help boost the company’s ability to double its current production level and reserve growth.
Analysts at Sterne Agee believe Chesapeake Energy Corporation (NYSE:CHK) urgently sold its assets without substantial cash flow to meet its $4 billion to $7 billion asset sale target this year. The analysts noted that the sale price of the property is equivalent to $574 per acre.
Sterne Agee analysts Tim Rexvan and Truman Hobbs commented, “The incremental $93 million should be additive to the $1.5 billion already raised this year, versus the 2013 asset sale target of $4-$7 billion.”
They emphasized that their previous underperform rating for the shares of Chesapeake Energy Corporation (NYSE:CHK) was based on uncertainty that the company would be able to meet its sale target without selling assets with associated cash flow/production. Rexvan and Truman cited that production from the assets were minimal (2 MMf/d net from 1.2 net wells).
The analysts maintained their underperform rating for shares of Chesapeake Energy Corporation (NYSE:CHK) with a $19.25 price target. They recommended a neutral rating for shares of Southwestern Energy (NYSE:SWN) with a $35.48 price target.
The stock price of CHK is up by 0.21 percent to $19.37 per share on Tuesday around 11:51 AM in New York. Its trading price is higher than the price target of the analysts. SWN is trading around $36.94 per share.