Chesapeake: Mulls on Texas asset deal
Chesapeake Texas asset deal may be VPP
Chesapeake Energy is shopping its South Texas assets to banks as a volume production payment transaction after initial bids failed to spark an acreage deal, the natural gas company's chief financial officer said.
In a typical volumetric production payment (VPP) transaction, the buyer is entitled to receive a share of oil or gas produced on certain acreage in exchange for an upfront payment.
VPPs are seen as less risky than buying oil and gas properties outright and tend to attract more interest when commodity prices are high, said a Reuters report.
"We received some bids that we thought were no more competitive than VPP transaction values," Chesapeake's chief financial officer, Marc Rowland, told investors at the Bank of America Energy Conference in remarks broadcast on the Internet.
"We are actually both negotiating with the people that have put the bids in, and have taken the package to the banks that have said they were interested in a VPP," he said.
The value of the expected transaction is expected to be $650 million to $800 million, Rowland said.
Chesapeake, which is working to shore up its cash position, said last month that it expected the South Texas deal to close in the fourth quarter.
Rowland did not comment on the timing of a possible asset sale or VPP transaction and a spokesman for Chesapeake could not immediately be reached.
Shares of Chesapeake fell 4%, or 89 cents, to $20.93 on the New York Stock Exchange, outperforming a 5% drop in the American Stock Exchange index of natural gas companies.