US-based Chesapeake Energy has signed an agreement to pass on its interests in the Barnett Shale operating area in North Texas to Saddle Barnett Resources, which is backed by equity and infrastructure investment company First Reserve.
The deal will increase Chesapeake's operating income, before charges and other termination costs associated with the transaction by approximately $200 to $300m per year from this year through to 2019.
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It will also reduce gathering, processing and transportation (GP&T) expenses for the remainder of this year by about $250m.
In addition, future Barnett midstream and downstream commitments of approximately $1.9bn would be reduced with the company’s latest move.
In exchange for $66m, Chesapeake also re-negotiated its existing gas gathering agreement with Williams, covering the mid-continent operating area to a fixed-fee arrangement.
As part of the latest deal, these two companies will terminate the agreement and the former expects to pay Williams a sum of $334m.
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By GlobalDataSaddle Resources is expected to pay an additional sum.
Subject to various closing conditions including the receipt of third-party consents, the transaction is expected to close in the third quarter of this year.
Chesapeake CEO Doug Lawler said: "We are also releasing preliminary 2017 guidance for the items most directly impacted by these transactions, including wide initial ranges for production and capital spending, in order to highlight our flexibility around commodity prices.
“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."
Barnett properties include about 215,000 net developed and undeveloped acres and around 2,800 operated wells.
Net production impact from the proposed transaction is expected to be about 62,000 barrels of oil equivalent per day.
