Chesapeake doesn’t have a stellar reputation with land owners and royalty owners, no matter how hard they try to massage it. They are generally viewed as the industry’s resident bad-boys, as many land owners will agree. Chesapeake has a history of being a lawsuit magnet. In May of 2016, Chesapeake announced that it settled some $52 million worth of lawsuits involving the Austin Chalk, and also reached settlement with the City of Fort Worth, as reported by Max B. Baker with the Fort Worth Star-Telegram (“Chesapeake Energy Settles Royalty Lawsuits for $52 Million,” May 23, 2016). More lawsuits are still outstanding.
Now Chesapeake has announced, evidently today, that it has revised and reaffirmed its revolving credit with a $3 billion line, down from the expected $3.8 billion. They claim they intend to forge ahead with company growth.
More importantly, Chesapeake remains on track to divest all of its assets in the Utica Shale, worth some $2 billion. The sale was announced near the end of July, 2018. The buyer is Encino Acquisition Partners, a non-publicly traded company owned primarily by the Canada Pension Plan Investment Board, the entity that created it (Ryan Collins, “Chesapeake’s $2 Billion Shale Sale Boosts Investor Fervor,” July 26, 2018). All of the proceeds are expected to be used to buy down debt.
For those Ohioans who have experienced a bad relationship with Chesapeake as a payer and leasehold owner, take heart. The sale is expected to close before the end of September at the earliest, or the end of this year at the latest. Then the waiting game will begin, to find out if the management company hired by Encino to actually manage the day-to-day operations of Encino in the Utica Shale (including issuing royalty checks and lease payments), will be an improvement.