Colorado oil and gas company to buy Chesapeake Energy assets for $385 million
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The new deal by the Denver-based oil and gas company follows last July’s announcement of FourPoint‘s $850 million deal for assets in western Oklahoma owned by two subsidiaries of Oklahoma City-based Chesapeake (NYSE: CHK).
The deal not only increases FourPoint’s holdings in the area, but also offers “decades” of growth potential, said George Solich, FourPoint’s president and CEO.
“The properties to be acquired create visibility into decades of development growth and closely overlap FourPoint’s current acreage footprint. By optimizing our position we enhance optionality in drilling inventory allowing us to target the best upside locations that achieve the most economic rates of return,” Solich said.
Oil and gas companies around the country have been cutting budgets and selling assets in order to shore up balance sheets hammered by more than a year of low commodity prices.
Chesapeake executives on Wednesday said the company had reached deals to sell about $700 million worth of assets, including sales — such as FourPoint’s — that are expected to close by the end of the second quarter.
FourPoint said the nearly 3,500 active wells involved in the deal announced Wednesday are in a series of basins, including the Granite Wash, Missourian Wash, Upper and Lower Cleveland and Tonkawa formations.
The deal also made sense financially, said Tad Herz, FourPoint’s executive vice president and CFO.
“As the markets continue to remain volatile, acquiring an attractive producing asset that will significantly increase our current asset base while providing a stable cash flow profile should give FourPoint the financial flexibility to modify and adapt our development plan,” Herz said.
Including the wells and acres involved in the latest deal with Chesapeake, FourPoint said it will have 884,000 net acres of mineral rights with more than 7,600 wells producing the equivalent of about 435 million cubic feet of natural gas per day, with about 40 percent of that coming from oil and natural gas liquids.
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