Chesapeake Sells Its Brazos Valley Assets to Be Sold for $1.43 Billion to WildFire Energy

In order to sell its part of the sprawling Eagle Ford Shale acreage, Chesapeake Energy Corp. on January 18 concluded an agreement to trade its Brazos Valley region assets to WildFire Energy I LLC for $1.425 billion.

Chesapeake will maintain other assets in the Eagle Ford that at one time were estimated at from $4.6 billion to $5.9 billion by Enverus Intelligence Research, according to strip prices in mid-2022.

Chesapeake may have defied some expectations by selling to a private company, as in 2022 two high-profile Eagle Ford deals were transacted by public companies Devon Energy Corp. and Marathon Oil Corp. for privately-held E&Ps. Devon and Marathon Oil, spending a total of $4.8 billion in the mature shale play.

Chesapeake decided to sell roughly 377,000 net acres and almost 1,350 wells in the Brazos Valley, along with related property, plant, and equipment, the company said. A subsidiary Brazos Valley Longhorn LLC has been used to manage those assets. In 2019, Chesapeake acquired approximately 420,000 net acres from WildHorse Resource Development Corp. for almost $4 billion.

The assets sold to WildFire averaged net daily production of almost 27,700 boe (85% liquid) during the third quarter of 2022. As of December 31, 2021, net proved reserves associated with these properties were approximately 96.8 MMboe.

The company will collect $1.2 billion upon closing, subject to customary adjustments, with the additional $225 million received in yearly installments of $60 million over the next three years and a final $45 million payment in year four.

For WildFire, the purchase follows the company's acquisition of MD America Energy in March 2022 and the acquisition of Hawkwood Energy LLC, which commenced the process of consolidating the basin in August 2021.

The Chesapeake purchase includes acreage in Burleson, Brazos, Robertson, Madison, Lee, Washington, and Grimes counties Texas.

Chesapeake said it expects proceeds will be used to repay borrowings under its revolving credit facility and be available for its share repurchase program. Chesapeake anticipated the WildFire transaction to close in the first quarter of 2023.

Chesapeake's Eagle Ford divestiture comes as it pivots toward a focus on producing natural gas. Analysts had anticipated that, given the size of its holdings, the Oklahoma City-based company would look to divest its South Texas assets in pieces.

Also, Chesapeake is one of the largest operators in the Marcellus, having entered the area through an acquisition in 2005. The company's position is concentrated in northeast Pennsylvania with about 650,000 net acres under lease. Additionally, Chesapeake began developing natural gas in the Haynesville in 2008 and currently holds leases covering roughly 350,000 net acres.

RBC Capital Markets, Citi, and Evercore are serving as financial advisers, Haynes and Boone, LLP is serving as legal adviser, and DrivePath Advisors is serving as a communications adviser to Chesapeake.