Chesapeake Energy Corporation (NYSE:CHK) has inked a deal with OGE Energy Corp. (NYSE:OGE), that involves two subcidiaries of Chesapeake and OGE’s Enogex.
According to a report published on Equities.com, Enogex announced that it had signed a 15 year agreement with two subsidiaries of chesapeake energy, including Chesapeake Energy Corporation (NYSE:CHK) Marketing , Inc. (“CEMI”), for the right to produce natural gas from approximately 500,000 acres of land in the Cleveland Sands, Granite Wash, Tonkawa, and Marmaton plays of northwestern Oklahoma and the Texas Panhandle.
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The area also includes some portions of Roger Mills, Dewey, Ellis, and Custer counties in Oklahoma, as well as Hemphill, and Lipscomb counties in Texas. Keith Mitchel, Enogex President, is quoted saying, “this project further enhances our expanding presence in what is consistently among the top five economic plays in the country.” This deal will increase Enogex’s total net land, in acres that the company has committed to pursue various projects, sum to 600,000 net acres.
Mitchel added, “With this dedication, we now have more than two million net acres overall, primarily located in the Granite Wash, Cleveland Sands, Tonkawa, and Cana Woodford plays. It’s a nice fit with our strategy and will be accretive to 2012 earnings.”
The other half of the piece will see Enogex spend $70 million, in order to acquire nearly 200 miles of natural gas gathering assets from Chesapeake’s dedicated area, and will also be required to reimburse the company all costs incurred prior to June 1st, 2012. Additionally, Enogex plans to invest a further $255 million in the region during the year 2013.
It is quite perturbing to notice this kind of deal coming from Chesapeake, considering that it recently acquired more land in Ohio, 28000 acres from Everflow in February, while in the process parting out with $35 million, in an effort to expand its business, as earlier reported in our posts. The company has been involved in various road improvement projects in an attempt to boost development responsibility, as we earlier featured it in a series of articles.
Nonetheless, this is yet another sale of land by Chesapeake Energy Corporation (NYSE:CHK), after we recently featured in an article, noting the sale of 3,300 acres in the Barnett Shale, in North Texas, to raise $100 million.
CEMI president, Jim Johnson, expressed that the company looks to continue building its long standing relationship with Enogex, which is indicative that this is not the first deal the pair has struck. Johnson added, “the leverage created by Enogex’s existing assets and extensive processing investment in the area will make Enogex an excellent partner in the continued development of a significant portion of our Cleveland Tonkawa leasehold, producing crude oil and high NGL content natural gas”.
Enogex has planned to complete the first phase of the new processing plant in Wheeler County, Texas this summer, while a second processing plant is already under-way in Custer County, Oklahoma, and should be done by the end of 2013.
The report indicates that Enogex currently owns and operates more than 8,000 miles of pipe, has eight processing plants, and a whopping, 24 billion cubic feet of natural gas storage capacity in Oklahoma and Texas.
Today, Enogex’s parent company, OGE Energy Corp. (NYSE:OGE)’s stock was up $1.16, or 2.19% increase, to close at approximately $54 per share.