Chesapeake Energy Corp. (CHK) is considering selling some of its holdings in the Oklahoma Stack region as the natural gas company unloads its assets to reduce its debt burden. Chesapeake interviewed advisors to oversee a prospective sale, according to sources close to the matter. The company is also rumored to have held informal talks with prospective buyers.
The company’s Oklahoma holdings could fetch between $300 million and $700 million, according to sources. Chesapeake has yet to officially retain an advisor, and may still choose not to sell.
Oklahoma’s Stack and Scoop regions are two of the best areas in the entire U.S. to drill for oil. Producers can still earn a profit when drilling here despite commodity prices being so low. Vanguard Natural Resources LLC and Gastar Exploration Inc. have both hired advisors to sell holdings in these key areas.
Aubrey McClendon, former CEO and co-founder who died in a car accident last week, was selling retiring bonds and assets to reduce the company’s debt, which totals $10.7 billion.
Chesapeake faces a few internal concerns that may hinder a sale of its Stack holdings. For one thing, executives at the company are apprehensive about starting an auction that would not result in a sale. Advisors were hired six months ago to sell holdings in the Utica Shale basin, but little-to-no interest was generated. Chesapeake’s solvency can also cause issues and may turn off bidders despite offering its best assets.
Last month, Chesapeake made it clear that it was not planning on seeking bankruptcy protection.
So far this year, the company has already agreed to sell $700 million of its assets, and it expects to sell an additional $1 billion by the end of the year.
Doug Lawler, Chief Executive, noted that its Stack holdings were excellent, but still “undervalued” as an asset. On a recent call with analysts, Lawler said that the company had no “intention of selling in that area.” However, the CEO did note that the company would consider selling if it could “capture an excellent value for the company.”
The natural gas company currently controls about 1.8 million acres in the Stack area, with roughly 1,200 potential drilling locations. The company plans to operate three rigs this year.