Chesapeake sells last MidCon Compression assets

Listen to this article

The transaction is part of the company’s goal to be more focused on exploration and production of oil and gas, said Chesapeake spokesman Gordon Pennoyer.

“This sale is a continuation of Chesapeake’s strategy to streamline our overall portfolio to focus on our core assets and essentially completes our exit from the large-scale compression business,” Pennoyer said.

Though the transaction is less than 1 percent of the company’s $18 billion market capitalization, the sale is another sign that CEO Doug Lawler is executing his promise to make the company more streamlined and efficient, said Fadel Gheit, senior oil and gas analyst with Oppenheimer & Co. Inc.

“It’s a small piece of the business, but nevertheless, Doug Lawler is fulfilling his obligation to shareholders,” Gheit said.

Exterran bought 162 compressor units in Arkansas’ Fayetteville Shale, according to a release issued by the Houston-based company. As a part of the sale, Exterran will take over a contract with BHP Billiton Petroleum, which is using the compressors to move gas to market.

In February, Exterran inked a deal to buy 337 compressor units from Chesapeake for $360 million. Those assets service pipelines in Arkansas, Louisiana, Oklahoma, Texas and Wyoming. Chesapeake sold its Fayetteville Shale-based upstream assets in 2011.

Gheit said the sale is further evidence that Lawler is working to make Chesapeake more investor-friendly. Lawler joined the company in August, with the goals to reduce debt, simplify the business and sell off subsidiaries not directly related to finding and producing oil and gas. Creating a focused business is good regardless of the sector, Gheit said.

“Most investors don’t like to see a jack of all trades,” he said.

He said the company is evolving from its early days in the late 1990s and early 2000s, when it spent hundreds of millions buying up as much acreage as possible across the country’s shale formations.

The sale to Exterran and exiting the compression business is a step in the right direction, he said.

“You don’t win ballgames by hitting grand slams every single time. A single at bottom of the ninth is still a good thing,” Gheit said. “If Lawler has the winning attitude, he believes in the strategy and stays focused, he can continue to move the company forward.”