Facing a $22 billion cash shortfall because of falling natural-gas prices, Chesapeake Energy Corp. is selling its pipeline interests to Global Infrastructure Partners for $4.08 billion.
Buying Chesapeake’s pipeline partnership assets and other pipelines will add to Global Infrastructure’s more than $10 billion of investments in pipelines, power generation, ports and airports. In addition to this sale, Chesapeake Energy Chief Executive Aubrey McClendon is seeking buyers for assets from Appalachia to the Rocky Mountains to plug a cash-flow shortfall.
Chesapeake Midstream operates pipeline networks in Texas, Louisiana, Pennsylvania and other gas-producing states, and had 3,953 miles (6,360 kilometers) of pipelines as of March 31. The partnership gets about 75 percent of its revenue from Chesapeake Energy, with the remainder from energy producers such as France’s Total SA (FP) and Norwegian oil company Statoil ASA. (STL) Chesapeake Energy also owned 1,950 miles of pipelines separate from the Midstream partnership as of Dec. 31.
Global Infrastructure’s investments in pipelines, water, waste and transport have annual revenue of more than $4 billion and employ 12,000 people, according to its website.
Shedding the pipelines is a retreat from McClendon’s vision of vertical integration, which involves owning oil and gas fields as well as ancillary assets such as gas-processing plants, drilling rigs and hydraulic-fracturing equipment.
Chesapeake Energy said in its most recent annual report that owning pipelines makes the company more efficient at managing costs involved with gathering and processing gas.