Chesapeake finalizes exit from Eagle Ford basin with SilverBow deal.

Chesapeake finalizes exit from Eagle Ford basin with SilverBow deal.

Chesapeake Energy Completes Exit from Eagle Ford Basin with $700 Million Asset Sale to SilverBow Resources

Eagle Ford Assets

In a move that marks the completion of its exit strategy from the south Texas basin, U.S. natural gas producer Chesapeake Energy has announced the sale of its remaining Eagle Ford assets to SilverBow Resources for a whopping $700 million1. This sale is part of Chesapeake’s broader strategy to focus on the Marcellus and Haynesville shale formations, which are known for their significant gas reserves2.

Chesapeake’s decision to divest from the Eagle Ford acreage is not new. Last year, the company made it clear that it no longer saw the basin as a core part of its strategy3. Instead, it aimed to concentrate on its operations in areas with substantial gas reserves. This strategic shift was also prompted by pressure from activist investment firm Kimmeridge Energy Management, which advocated for a stronger focus on natural gas production4.

This latest deal with SilverBow Resources follows Chesapeake’s previous asset sales in the Eagle Ford basin, which have generated over $3.5 billion in proceeds to date5. In January, the company sold portions of its operations to WildFire Energy for $1.43 billion, followed by another sale to chemical maker INEOS for $1.4 billion the following month6. These divestments have allowed Chesapeake Energy to streamline its portfolio and ultimately reallocate resources to areas that align more closely with its long-term goals.

The agreement between Chesapeake Energy and SilverBow Resources involves the transfer of approximately 42,000 net acres and 540 wells located in Dimmit and Webb counties, along with associated property, plant, and equipment7. The average net daily production from these assets during the second quarter was approximately 29,000 barrels of oil equivalent8.

SilverBow Resources, following the completion of this deal, is set to become the largest public pure-play Eagle Ford operator9. This positions the company favorably in the industry and presents numerous growth opportunities. The acquisition will have an immediate positive impact on SilverBow’s key financial and operating metrics, solidifying its position as a major player in the Eagle Ford basin10.

Under the terms of the deal, Chesapeake Energy will receive an upfront cash payment of $650 million upon closing, with an additional deferred cash payment of $50 million after 12 months11. There is also a potential for an extra $50 million in contingent cash based on future commodity prices12. These arrangements further underscore SilverBow Resources’ commitment to the success of this transaction and its confidence in the potential of the Eagle Ford assets.

The sale of Chesapeake’s Eagle Ford assets to SilverBow Resources is a significant milestone for both companies. Chesapeake Energy can now fully concentrate on its strategic focus areas, while SilverBow Resources strengthens its position as a leading operator in the Eagle Ford basin. This transaction not only signals confidence in the potential of the Eagle Ford assets but also illustrates the dynamism in the energy industry as companies adapt to changing market dynamics.

Overall, the sale of the remaining Eagle Ford assets is a positive development for both Chesapeake Energy and SilverBow Resources. As Chesapeake continues to refine its portfolio and adapt to market demands, SilverBow Resources stands to benefit from its increased presence in one of the most prolific energy-producing regions in the United States. This deal not only bolsters the confidence of investors in both companies but also highlights the ongoing transformations in the energy sector.

  1. Source: Reuters↩︎

  2. Source: The Wall Street Journal↩︎

  3. Source: Bloomberg↩︎

  4. Source: Seeking Alpha↩︎

  5. Source: Reuters↩︎

  6. Source: Reuters↩︎

  7. Source: Reuters↩︎

  8. Source: Reuters↩︎

  9. Source: Reuters↩︎

  10. Source: Reuters↩︎

  11. Source: Reuters↩︎

  12. Source: Reuters↩︎