Second-largest US producer of natural gas to sell oil, gas assets for $5.37 billion

Southwestern Energy said it would buy some oil and gas assets in the Marcellus and Utica shale fields in West Virginia and Pennsylvania from Chesapeake Energy Corp for about $5.37 billion.

But investors dumped Southwestern stock, sending it down 12 percent to a more than two-year low of $31.34, indicating that the company had overpaid for the assets.

SunTrust Robinson Humphrey analyst Ryan Oatman said that according to his calculations Southwestern would pay $9,625 per acre for the assets.

The deal is positive for Chesapeake and other Utica and Marcellus shale players as it marks the first time the brokerage has seen a company pay more than $5,000 per acre for assets in the area, Oatman added.

The company, which already has assets in Fayetteville shale and northeastern Pennsylvania Marcellus, will add 256 operated and producing horizontal wells and 179 non-operated horizontal wells. It plans to deploy four to six rigs in 2015 for the new assets and increase that number to 11 rigs by 2017.

The average net daily production from the wells was about 56,000 barrels of oil equivalent in September, consisting of 184 million cubic feet of gas, 20,000 barrels of natural gas liquids and 5,000 barrels of condensate, Chesapeake said.

Chesapeake, the second-largest US producer of natural gas, has been selling assets to reduce debt and improve profitability after Aubrey McClendon was forced out as CEO in April last year over spending.

Southwestern said it would fund the transaction with its existing revolving credit facility and a $5 billion loan from Bank of America.