--Asset sale is second this week for Chesapeake
--Chesapeake just shy of original $11 billion sales target
--Energy companies trading assets amid boom in energy
production
(Updates with details, analyst comment.)
By Ben Lefebvre and Ben Fox Rubin
Plains All American Pipeline L.P. (PAA) said it bought crude oil
and condensate gathering assets in the Eagle Ford area of South
Texas from Chesapeake Energy Corp. (CHK) for $125 million,
expanding the pipeline company's stake in a growing energy
region.
The deal marks the second deal Chesapeake inked this week, after
the natural-gas producer agreed to sell a substantial majority of
its remaining midstream assets for about $2.16 billion in cash to
Access Midstream Partners L.P. (ACMP). The sales bring Chesapeake
closer to its minimum target of $11.4 billion in total asset sales
for 2012 and will help the debt-plagued gas and oil driller to
receive financing, said Morningstar analyst Mark Hanson.
Assuming the deal closes this month, Chesapeake will finish the
year with about $10.8 billion in proceeds from asset sales, with an
additional $425 million worth of deals expected to close in the
first quarter of 2013. The Oklahoma City company holds about $10.8
billion of debt on its balance sheet as it makes an expensive shift
to oil drilling after natural-gas prices remain and at low
levels.
"It does help somewhat that they got this deal done," Mr. Hanson
said of Chesapeake. "If they hadn't sold this week, they still
could have secured financing, just at maybe a higher price
interest-wise."
Plains, Chesapeake and other U.S. energy companies are making
radical changes to their assets as a technology-driven drilling
boom has unleashed oil and gas supplies in disparate regions.
Producers are having to deploy drills to North Dakota, south Texas
and the northeast to develop new wells while pipeline companies
have to mix-and-match new and existing lines to bring the bounty to
market.
The assets Plains All American is acquiring included about 40
miles of crude oil/condensate gathering pipelines with a throughput
capacity of about 50,000 barrels a day. The deal also includes
150,000 barrels of existing crude oil and condensate storage
capacity and 300,000 barrels of storage capacity under
construction, and a truck unloading terminal.
Plains said the acquired assets complement and will connect to
its existing crude oil and condensate gathering systems. The
company earlier this month agreed to buy five crude-oil rail
terminals from U.S. Development Group for $500 million as Plains
looks to expand its nationwide rail network. The deal includes
three crude-oil rail loading terminals in the Eagle Ford, Bakken
and Niobrara producing regions.
Plains, which transports, stores and sells oil and natural gas,
receives fees for many of its services, so it is less affected by
the volatility of oil and gas prices. The partnership also holds a
48% stake in PAA Natural Gas Storage L.P. (PNG), the company's
gas-storage spinoff.
The company said it currently owns about 18,000 miles of liquids
pipelines, 120 million barrels of liquids storage capacity and
handles more than 3 million barrels of physical product on a daily
basis.
Plains shares traded at $45.10, down 0.1%. Chesapeake's shares
were $16.91, down 0.2%.
Write to Ben Lefebvre at ben.lefebvre@dowjones.com and Ben Fox
Rubin at ben.rubin@dowjones.com
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