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UPDATE 2-Chesapeake says still buying Utica properties
November 30, 2011 / 3:51 PM / in 6 years

UPDATE 2-Chesapeake says still buying Utica properties

* Sees competition from Exxon, Hess in Utica

* Still expects Utica venture by end-year

* Shares up 4 pct

By Anna Driver

HOUSTON, Nov 30 (Reuters) - Chesapeake Energy Corp is still buying acreage in Ohio’s Utica shale formation, Chief Executive Officer Aubrey McClendon said on Wednesday, but is facing increased competition there from companies such as Exxon Mobil Corp and Hess Corp .

Chesapeake is the most aggressive buyer of land in the new U.S. shale formations, which are believed to hold massive reserves of natural gas and oil.

“Right now there’s still acreage to be acquired,” he told reporters at the Jefferies & Co energy conference.

Chesapeake’s huge appetite for new property has left the company too debt-laden to pay for drilling, and has forced it attract joint venture partners to help pay development costs.

The company is expected to make an announcement later on Wednesday about a $750 million preferred share sale that it first announced on Nov. 3 and said it would close by Nov. 30.

That sale of preferred shares would be for its newly formed entity, CHK Utica LLC, which owns about 700,000 acres of leasehold in the Utica shale.

McClendon said the company is still on track to close a joint venture deal for some of its Utica acreage by the end of the year. Chesapeake has so far only said the pact was made with a large international company, which some analysts believe might be France’s Total SA .

Chesapeake, which has said it will raise up to $13 billion next year to help close a funding gap some analysts estimate at more than $7 billion, will not consider asset sales, McClendon said.

Asset sales currently do not make sense for Chesapeake as long as natural gas prices remain depressed, McClendon said, adding that the company will continue to look at volumetric production payments and other ways of monetizing cash flow from its wells.

Chesapeake will end its major acreage purchases next year, McClendon said.

Shares in Chesapeake were up over 4 percent at $24.74 on the New York Stock Exchange.

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