Chesapeake Energy is transferring its 215,000 acres of natural gas assets in the Barnett Shale to a Dallas company backed by a global private-equity firm. Once, Chesapeake was the proud face of the shale gas drilling boom in northern Texas, but now it does not look like it. Chesapeake’s assets include around 2,800 operating wells.

Chesapeake Energy Logo

Chesapeake not getting any cash

On Wednesday, the energy company announced that it is not receiving any cash for the assets in turning them over to Saddle Barnett Resources LLC. In its announcement, the energy giant said that Saddle Barnett is backed by First Reserve – an investment and equity firm focused only on energy assets.

To get out of a pipeline deal to transport the Barnett Shale natural gas, the Oklahoma-based company has agreed to pay Williams Partners around $334 million as part of the deal. To cancel the deal, Saddle Barnett will pay $420 million to Williams. The energy company said the transfer will hopefully close in the Q3 of 2016, subject to closing conditions.

In a statement, Chesapeake CEO Doug Lawler said this marks a major step in their continued progress to transform Chesapeake. Lawler took over the Oklahoma City-based company from the late Aubrey McClendon, who was widely considered to be a controversial chief executive.

Good for all

The energy company entered the Barnett Shale in 2004 and became a chief player there. By leaving Barnett, the energy giant is hoping to increase its operating income by between $200 million and $300 million per year through 2019. The energy company said it will completely remove about $1.9 billion of future downstream and midstream commitments.

The transaction is good for everyone involved, said Williams Partners executives. In addition, Chesapeake Energy will give an added $66 million to Williams to renegotiate the existing gas gathering agreement in Oklahoma. This will help the energy company lower its costs by 36%.

Lawler has been tasked by the board to turn around the once-proud energy company.

“The transformation of Chesapeake into a top-tier E&P company continues, and these transactions, along with our previously announced balance sheet and liquidity improvements, provide significant forward progress. We believe there are more positive moves to come,” Lawler said.

For months, there have been rumors about a probable sale of Chesapeake’s northern Texas assets. Earlier this month during the company’s earnings call, Lawler said Barnett is “a great asset” but added that the company would not be putting capital into drilling in the near term.