Chesapeake Energy Corporation (NYSE:CHK), the second largest producer of natural gas, agreed to sell some of its shale assets to a subsidiary of EXCO Resources Inc (NYSE:XCO).

Chesapeake

According to Chesapeake Energy Corporation (NYSE:CHK), Exco Operating Company agreed to acquire its assets in the Northern Ford Shake and Haynesville Shale for approximately $1.0 billion. The second largest producer of natural gas stated that it will receive around 90 percent of the acquisition price upon closing the deal. Payment for the remaining proceeds will be subject to general post-closing contingencies.

Chesapeake Stated

Chesapeake Energy Corporation (NYSE:CHK) previously stated that it aims to sell around $7 billion in assets this year to compensate for the gap between its cash flow and proposed spending. The company is short $3.5 billion in funding. The energy company already sold around $3.6 billion worth of assets year-to-date. Its long-term debt is around $13.4 billion.

Texas Purchases

Under the terms of the agreement, Exco Operating Company purchased approximately 55,000 net acres in Zavala, Dimmit, La Salle and Frio counties Texas including 120 producing wells. Chesapeake Energy Corporation (NYSE:CHK) said that the average net daily production of the wells in the area is 6,100 barrels or the equivalent in May.

Louisiana Purchases

Exco Operating Company will acquire the operated and non-operated assets of Chesapeake Energy Corporation (NYSE:CHK) at Haynesville Shale. The assets include 9,600 net acres in Desoto and Caddo parishes, Louisiana with 11 units operated by Chesapeake and 42 units operated by EXCO Resources Inc (NYSE:XCO). The sold properties have average net daily production of around 114 million cubic feet of natural gas equivalent in May.

“Today’s announcement brings our year-to-date asset sales signed or closed to approximately $3.6 billion, which, combined with forecasted net operating cash flow, enables Chesapeake to fully fund its 2013 capital expenditure budget. Additional asset sales contemplated for later this year may reduce long-term debt and further enhance our financial liquidity,” said Doug Lawler, CEO of Chesapeake Energy Corporation (NYSE:CHK).

The energy company  stated that the impact of the transaction on its net production and capital expenditures had been reflected in the May 1 outlook of Chesapeake Energy Corporation (NYSE:CHK). The companies expect to complete the deal in the third quarter of 2013.

Jefferies Group LLC (NYSE:JEF) serves as financial advisor to Chesapeake Energy Corporation.

Early this year, the energy company agreed to sell its 50% stake in Mississippi Lime assets in Northern Oklahoma to International Petroleum Exploration & Production Corp., Sinopec for $1.02 billion in cash.