Chesapeake lines up stalking horse bidder for Midcon assets

Cash-strapped US independent Chesapeake Energy has identified a buyer to bid on its remaining assets in the Midcontinent region of Texas and Oklahoma at auction next month.

Privately held Tapstone Energy beat out some 58 potential buyers and is expected to place a "stalking horse" starting bid of $85 million for the assets at the auction, which is scheduled for 10 November, according to documents filed on Tuesday in a Texas bankruptcy court.

According to its annual report filed earlier this year, Chesapeake had 1.128 million gross — or 736,000 net — acres in the play at the end of 2019. The acreage produced around 14,000 barrels of oil equivalent per day in 2019, according to the company's most recent investor presentation.

The closing date is targeted for 11 December.

Chapter 11 process ongoing

The potential sale may mark the end of a long process by which Chesapeake, currently in the midst of Chapter 11 bankruptcy proceedings, has sought to divest its Midcontinent assets.

The marketing process was relaunched on 3 August, however, with the help of investment firm Intrepid Partners. According to court documents, Chesapeake contacted about 85 entities about the sale and executed confidentiality agreements with around 58 potential bidders.

Tapstone, which itself underwent a financial restructuring earlier this year, was established in 2013 by Chesapeake co-founder Tom Ward, after he was ousted by activist investors at SandRidge Energy, which he also founded.

Ward left Tapstone in 2016 and established Mach Resources, another Oklahoma-focused company that sprang for Alta Mesa's assets earlier this year.

Tapstone is now helmed by Steve Dixon, a former Chesapeake executive, and is backed by Kennedy Lewis Investment Management.