Tulsa World: Chesapeake forms joint venture to produce gas

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Chesapeake forms joint venture to produce gas
Global Infrastructure will purchase a 50 percent interest.

By AP Wire Services
Published: 9/26/2009 2:27 AM
Last Modified: 9/26/2009 4:20 AM

OKLAHOMA CITY (AP) — Chesapeake Energy Corp. has signed a definitive agreement to form a joint venture with Global Infrastructure Partners to manage some natural gas gathering and processing assets.

The Oklahoma City-based natural gas producer said Thursday it would contribute a portion of its pipeline assets to the joint venture, which will be called Chesapeake Midstream Partners LLC.

Global Infrastructure, a private equity fund, will purchase a 50 percent interest in the joint venture and pay Chesapeake $588 million in cash. Chesapeake will retain the remaining interest.

Chesapeake said assets to be transferred into the venture include most of its midstream assets in the Barnett Shale field and a majority of its nonshale midstream assets in the Arkoma, Anadarko, Delaware and Permian basins.

The joint venture will handle unregulated business activities for both Chesapeake and other natural gas producers, the company said. The announcement follows several previously completed steps that have reduced Chesapeake's leverage and cost structure, Stifel Nicolaus & Co. analyst Michael Hall said.

"The new JV also provides a vehicle for future midstream monetizations as additional assets reach the appropriate level of maturation," he wrote. "This should continue to enhance financial flexibility and returns in the years ahead."

Hall maintained his "Buy" rating on Chesapeake with a target share price of $38. He also reaffirmed his forecast of earnings per share of $2.46 in 2009 and $2.96 in 2010. Wall Street analysts polled by Thomson Reuters expect a profit of $2.39 in 2009 and $2.38 in 2010.

Shares of Chesapeake Energy fell 29 cents, or 1 percent, to close Friday at $27.53.

Rod Walton 581-8457
rod.walton@tulsaworld.com By AP Wire Services

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