Drilling for value

16 October 2014 By Kevin Allison

The U.S. gas driller’s market cap jumped 17 pct, or about $2 bln, after rival Southwestern agreed to buy some wells. The acquirer’s 11 pct share-price slide suggests the deal favors Chesapeake. But it also gives CEO Doug Lawler a one-shot fix for his company’s balance sheet.

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Chesapeake Energy on Oct. 16 said it would sell some oil and gas assets in the Marcellus and Utica shale fields in West Virginia and Pennsylvania to Southwestern Energy for about $5.37 billion.

Chesapeake, the second-largest U.S. producer of natural gas, has been selling assets to reduce debt and improve profitability after Aubrey McClendon was forced out as chief executive in 2013.

Robert “Doug” Lawler, Chesapeake’s CEO, said the sale would bring “a dramatic improvement” in the company’s financial strength.

Chesapeake’s shares rose about 17 percent by about 3.30 p.m. in New York, adding approximately $2 billion in market value. Southwestern shares were down around 11 percent, equivalent to about $1.3 billion of market capitalization.

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