Chesapeake Energy’s Marcellus Shale Strategy Changes – 20% of Their Leases Now For Sale

Seems there’s been a strategy change at Chesapeake Energy with respect to Marcellus Shale drilling. Chesapeake is the largest player in the Marcellus with some 1.5 million net acres under lease. As recently as last week (see this MDN story) they boasted of having 24 drilling rigs (expanding this year to 31) in operation, and plans to drill 170 Marcellus shale gas wells in 2010. But that was last week. This week they’re looking to sell off 20 percent of their Marcellus leases to help raise $5 billion to pay down debt and invest in other ventures. No, they certainly aren’t abandoning the Marcellus—not by a long shot. But it is quite a strategy shift from upper management. From their recent press release:

Chesapeake Energy Corporation today announced a strategic and financial plan designed to increase shareholder value, reduce debt and ultimately achieve an investment grade rating for the company’s debt securities. Through a series of transactions over the next 24 months, including the preferred stock placement announced today, the company is planning to raise up to $5.0 billion in order to repay up to $3.5 billion of senior indebtedness and increase its investment in liquids-rich plays by up to $1.5 billion. Chesapeake is in various stages of implementing its strategic and financial plan, several steps of which are outlined below.

The company is planning to sell up to a 20% equity interest in its subsidiary, Chesapeake Appalachia, L.L.C., which includes its Marcellus Shale operations, to private and/or public investors within the next 3-12 months. Chesapeake is one of the largest producers, the largest leasehold owner with 1.5 million net acres and the most active driller with 24 operated rigs in the Marcellus Shale play.*

*Chesapeake Press Release (May 10) – Chesapeake Energy Corporation Announces Strategic and Financial Plan to Increase Shareholder Value and Reduce Debt