Chesapeake Energy Corporation (NYSE:CHK) reported that it has finalized a deal to show its interests in the Barnett Shale to Saddle Barnett Resources, LLC. It is a firm backed by First Reserve, a global infrastructure investment and private equity investment firm, focused on energy. At the same time, the company will terminate future commitments related with this asset.
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The reported deal will improve Chesapeake’s operating income by nearly $200 million to $300 million annually from 2016 through 2019. It also minimizes GP&T expenses by almost $250 million, including amount of $170 million for an estimated MVC shortfall payment. The deal can result in GP&T expenses to come in between $7.15 and $7.65 per boe in FY2017, compared to FY2016 guidance of $0.45 per boe.
Chesapeake reported deal can help the company to reduce estimated FY2017 GP&T expenses by nearly $465 million, including GP&T costs of $230 million of estimated MVC shortfall payments. It removes future Barnett Shale downstream and midstream commitments of almost $1.9 billion. Moreover, it will enhance the PV-10 of the firm’s total proved reserves by almost $550 million after elimination of Barnett assets and the related estimated MVC shortfall payments.
As part of the deal, Williams Partners (NYSE:WPZ) and Chesapeake have agreed to cancel the current gathering deal, estimated MVC shortfall fees and payments linked to the Barnett Shale assets. The transaction is anticipated to close in 3Q2016. Moreover, the form reported it has renegotiated its gas gathering deal with Williams in Mid-Continent operating area in lieu for a payment of $66 million.
Chesapeake accelerated the gas supply contract value by selling its rights under a deal for $146 million in proceeds. Doug Lawler, the CEO, said that these reports mark a noteworthy step in the overall development to transform company. They expect to increase operating income for period 2H2016 through 2019 between $200 million and $300 million yearly.