Chesapeake Energy in talks to sell pipeline assets to GIP for over $4 bn: report

Chesapeake Energy, the second- largest natural-gas producer in the US, is in advanced talks to sell nearly its entire pipeline assets to Global Infrastructure Partners (GIP), for over $4 billion, Bloomberg yesterday reported, citing two people familiar with the matter.

The Oklahoma-City based company, which needs to sell assets in order to fill a budget gap of $9 billion to $10 billion, is planning to sell its entire stake in Chesapeake Midstream Partners and other pipeline assets to private equity firm GIP.

Under a possible deal, GIP, owner of Gatwick and London City airports in the UK, would pay around $2 billion for Chesapeake's entire 45 per cent stake in Chesapeake Midstream Partners, and an additional $2 billion for other pipeline assets held directly by the company.

Along with other natural gas companies in the US, Chesapeake has been hit hard by falling natural gas prices. Its stock has declined by 29 per cent this year after a 14 per cent fall in 2011.

Chesapeake, which is facing a cash shortfall of several billion dollars due to low gas prices, has curtailed its drilling in some fields, and said early this year that it would shut production in some gas fields.

Chesapeake prospered during the shale gas boom in the US and went on an acquisition spree of unexplored shale gas fields. The company has good natural gas shale acreages in the Barnett in Texas, and the Haynesville in Louisiana and Arkansas, which together make for almost half its total output.