Chesapeake selling Permian and midstream assets for $6.9B; Chevron, Shell and EnerVest acquiring Permian assets for combined $3.3B

13 September 2012

Chesapeake Energy Corporation entered into multiple agreements to sell the vast majority of its Permian properties, substantially all of its midstream assets and certain noncore leasehold for total net cash proceeds of approximately $6.9 billion. The company will use a portion of the proceeds from these asset sales to fully repay its $4.0 billion of term loans during the 2012 fourth quarter.

Permian Basin. Chesapeake has entered into purchase and sale agreements with three companies covering the vast majority of its Permian Basin assets for total net proceeds of approximately $3.3 billion. The Permian Basin assets being sold produced approximately 21,000 barrels of liquids and 90 million cubic feet of natural gas per day during the 2012 second quarter, or approximately 5.7% of Chesapeake’s production during the quarter.

• Chesapeake entered into a purchase and sale agreement to sell its assets in the southern Delaware Basin portion of the Permian Basin to SWEPI LP, a subsidiary of Royal Dutch Shell plc.

• Chesapeake entered into a purchase and sale agreement to sell its assets in the northern Delaware Basin portion of the Permian Basin to Chevron USA Inc., a subsidiary of Chevron Corporation

• As previously announced, the company has entered into a purchase and sale agreement to sell its producing assets in the Midland Basin portion of the Permian Basin to affiliates of Houston-based EnerVest, Ltd.

• Chesapeake is retaining approximately 470,000 net acres of undeveloped leasehold in the Midland Basin for future sale or development.

Chesapeake expects to close all three transactions within the next 30 days and to receive approximately 87% of the proceeds in cash at closing. Payment of the remaining proceeds will be subject to certain title, environmental and other standard contingencies.

Midstream. In addition, Chesapeake entered into sale agreements with respect to substantially all of its midstream assets in three separate transactions and also expects to enter into a fourth agreement, which would result in combined proceeds of approximately $3.0 billion.

• The company has entered into a letter of intent with Global Infrastructure Partners (GIP) covering most of the midstream assets owned by Chesapeake Midstream Development, L.P., a wholly owned subsidiary of Chesapeake, for expected proceeds of approximately $2.7 billion. The assets to be sold to GIP include gathering and processing systems in the Eagle Ford, Utica, Haynesville and Powder River Basin Niobrara shale plays and certain other assets.

  The transaction with GIP would include new market-based gathering and processing agreements covering certain acreage dedication areas and also include one new volume commitment covering approximately 70% of the company’s expected production volumes in the southern portion of our Haynesville Shale area during 2013-17.

• In addition, Chesapeake has sold or entered into purchase and sale agreements with two other companies to sell certain Mid-Continent midstream assets and also expects to enter into a fourth agreement to sell certain oil gathering assets in the Eagle Ford Shale for combined proceeds of approximately $300 million.

The midstream transactions are expected to close on various dates in the 2012 third and fourth quarters. When combined with the previous sale of its limited and general partnership interests in Access Midstream Partners, L.P. (formerly known as Chesapeake Midstream Partners, L.P.) in June 2012 for approximately $2.0 billion, Chesapeake’s total proceeds from its midstream exit will be approximately $5.0 billion.

Non-core assets. In four separate transactions, Chesapeake recently sold or entered into purchase and sale agreements to sell non-core leasehold assets in the Utica Shale and various other areas for approximately $600 million, the majority of which has already been received. Following these transactions, Chesapeake will continue to own approximately 1.3 million net acres of leasehold in the Utica Shale, in which its cost basis, net of various sales and its joint venture with Total, will be approximately $200 per net acre (including all drilling carries in the Total joint venture).

Jefferies & Company, Inc. and Goldman, Sachs & Co. are serving as financial advisors to Chesapeake regarding the Permian Basin asset sales and the sale of midstream assets to GIP.

These transactions are significant steps in the transformation of our company’s asset base to a more balanced portfolio among oil, natural gas liquids and natural gas resources and production by focusing on developing and harvesting the value embedded in the 10 core plays in which Chesapeake has built a #1 or #2 position.

—Aubrey K. McClendon, Chesapeake’s Chief Executive Officer

Chesapeake Energy Corporation 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 US. Headquartered in Oklahoma City, the company’s operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the US. Chesapeake owns leading positions in the Eagle Ford, Utica, Granite Wash, Cleveland, Tonkawa, Mississippi Lime and Niobrara unconventional liquids plays and in the Marcellus, Haynesville/Bossier and Barnett unconventional natural gas shale plays. The company also owns substantial marketing and oilfield services businesses through its subsidiaries Chesapeake Energy Marketing, Inc. and Chesapeake Oilfield Services, L.L.C.