Chesapeake Energy Corp. announced Wednesday that it agreed to sell its Eagle Ford assets in the Brazos Valley region to WildFire Energy I, backed by Warburg Pincus and Kayne Anderson, for $1.425 billion.
The seller expects the transaction to close in the first quarter of 2023. Chesapeake will receive $1.2 billion upon closing, with the additional $225 million paid in yearly installments of $60 million over the next three years and $45 million in year four.
Chesapeake used RBC Capital Markets, Citi and Evercore as financial advisors and Haynes and Boone as legal advisor led by Houston partner Jeremy Kennedy.
Kennedy, who joined the firm this past August from Shearman & Sterling, has counseled Chesapeake before, including on its $2.56 billion acquisition of Marcellus Shale oil and gas assets from Chief E&D Holdings last year.
The Texas Tech-trained lawyer also advised the company on its $450 million disposition of Powder River Basin oil and gas assets and its $2 billion divestiture of Utica Shale oil and gas assets.
In an interview Thursday, Kennedy said he has worked on 20 deals for Chesapeake since 2014, stretching all the way back to his days at Baker Botts. “It has been built up over time,” he said, noting his close relationship with General Counsel Benjamin Russ.
Chesapeake’s process to shed its Eagle Ford assets began this past summer, Kennedy said. And once the parties had identified WildFire as a potential buyer, it took six to eight weeks to complete given the holidays, he added.
Locke Lord confirmed it counseled WildFire led by partners Mitch Tiras and Kevin Peter, both of Houston. Additional assistance was provided by, from Texas, Derrick Carson, Jerry Higdon, Sara Longtain, Janet Militello, Terry Radney, Ed Razim, Jennie Simmons, Hunter Summerford, Chris Verducci, Elizabeth Guffy, Gabriella Achenbaum, Niha Ali, Kathleen Laird, Lauren Richter, Russell Stockman and Case Towslee, all of Houston, and Van Jolas and Geoffrey Polma, both of Dallas.
Tiras advised WildFire in the past, including its acquisition of acreage from MD America Energy for undisclosed terms; its purchase of Hawkwood Energy for $650 million; and its buy of acreage and associated production from Anadarko Petroleum Corp. and affiliates of Kohlberg Kravis Roberts & Co for $625 million.
The NYU- and South Texas College of Law-trained attorney also counseled the management team of WildFire on equity commitments exceeding $1 billion from management, Warburg Pincus and Kayne Private Energy Income Funds.
In this transaction, Chesapeake has agreed to sell about 377,000 net acres and around 1,350 wells in the Brazos Valley region of its Eagle Ford assets, along with related property, plant and equipment, to WildFire.
Chesapeake said the average net daily production from the properties was about 27,700 barrels of oil equivalent during the third quarter of 2022. As of Dec. 31, 2021, net proved reserves were around 96.8 million barrels of oil equivalent.
TPH analyst Matt Portillo said in a note Thursday that he sees this first transaction value in line with its expectations for the entirety of the Eagle Ford divestiture.
“We had penciled in the total Eagle Ford to be sold for above $3B with … Brazos Valley representing approximately 40 percent of the company’s current Eagle Ford oil production,” he wrote.
Chesapeake anticipates the proceeds will be used to repay borrowings under its revolving credit facility – currently at $671 million as of the third quarter, Portillo said – and be available for its share repurchase program.
“Today marks an important step on our path to exiting the Eagle Ford as we focus our capital on the premium, rock, returns and runway of our Marcellus and Haynesville positions,” Chesapeake president and CEO Nick Dell’Osso said in a statement. “We remain actively engaged with other parties regarding the rest of our Eagle Ford position.”