Monday, February 7, 2011

Chesapeake Energy opens up sharply on plans to sell stake in Fayetteville Shale

NEW YORK - Natural gas and oil producer Chesapeake Energy Corp. (NYSE: CHK) opened up more than $2 per share on Feb. 7 after it announced plans to sell its stake in the prolific Fayetteville Shale. The stock closed on Feb. 7 at 32.17, up $1.21.

Chesapeake announced before the market open that it will sell its stakes in the Fayetteville natural-gas field and two private energy companies in hopes of reducing its debt by as much as $3 billion.

The divestitures, expected to net $5 billion before tax, are part of a continuing push at the Oklahoma City energy producer to trim its long-term debt by 25 percent over the next two years while simultaneously boosting its oil and gas output by 25 percent. The company will likely spend some of the proceeds in its ambitious drilling program.

The announcement, in which Chesapeake said it will sell all of its assets in Arkansas's Fayetteville shale formation, further underscores the top U.S. natural-gas producer's shift away from natural gas to more lucrative oil exploration.

The stock is up 19.5 percent since Chesapeake said on Jan. 6 that it would pare debt.

Besides the Fayetteville divestiture, the plans announced call for the sale of minority positions in oilfield-service company Frac Tech Holding LLC and Oklahoma City oil and gas producer Chaparral Energy Inc.

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