Summary
Chesapeake Energy Corporation (Chesapeake) filed an 8-K report on May 12, 2004, detailing a significant acquisition and updated operational outlook. The company announced an agreement to acquire Greystone Petroleum LLC for $425 million, significantly expanding its natural gas property portfolio in the Ark-La-Tex region of northern Louisiana. This acquisition includes substantial proved reserves of 214 billion cubic feet of gas equivalent (bcfe) and current production of 45 million cubic feet of natural gas equivalent per day (mmcfe/d), with an additional estimated 51 bcfe of probable and possible reserves. The deal is expected to close on June 2, 2004, and will be financed through a combination of senior notes, an expanded bank credit facility, and cash on hand. In conjunction with the acquisition, Chesapeake has increased its 2004 production forecast to a range of 341-347 bcfe (940 mmcfe/d at the mid-point), with approximately 9.7 bcfe of this increase attributed to the Greystone assets. The company plans to boost production from these newly acquired properties by 50% through a targeted drilling program. Furthermore, Chesapeake has hedged the production from the acquired properties at an attractive price of $6.25 per mcf for June 2004 through June 2005, providing some insulation against commodity price volatility.
Key Highlights
- 1Chesapeake Energy announces agreement to acquire Greystone Petroleum LLC for $425 million.
- 2The acquisition includes natural gas assets in the Ark-La-Tex region of northern Louisiana, specifically targeting the Sligo Field.
- 3Estimated proved reserves from the acquisition are 214 bcfe, with an additional 51 bcfe of probable and possible reserves.
- 4The acquired properties are expected to add 45 mmcfe/d in current production to Chesapeake's operations.
- 5Chesapeake has increased its 2004 production forecast by 11.0 bcfe to 341-347 bcfe.
- 6Production from the acquired Greystone properties is hedged at $6.25 per mcf for June 2004-June 2005.
- 7The acquisition is anticipated to close on June 2, 2004, financed by senior notes, bank credit facility, and cash.