NEW YORK (TheStreet) - After Chesapeake Energy (CHK) and Devon Energy (DVN) both unveiled shale stake spins worth over $4.5 billion on Tuesday, investors should be reminded that there is more than enough dry powder to fuel an energy deal boom in 2012.
Chesapeake Energy sold a 25% stake in its Utica shale joint-venture with EnerVest to French oil giant Total (TOT) for $2.3 billion, meanwhile Devon Energy announced a sale of a 33% stake in five of shale prospects to Sinopec (SIPC) of China for $2.2 billion, giving a fast start to 2012 energy M&A after the sector led 2011 deals.
On news of their deals and rising oil and gas prices, Devon Energy and Chesapeake Energy shares spiked in Tuesday trading. With continued bullishness in the oil and gas sector, companies like BP (BP), Marathon Oil (MRO), SemGroup (SEMG), El Paso (EP ) [currently being acquired by Kinder Morgan (KMI) for $37.9 billion in the largest deal of 2011], Quicksilver Resources (KWK) and Chesapeake Energy could see a similar deals -based jolt if pending spinoff and divestiture plans were to be realized.
Even with its shale stake sale, Chesapeake Energy may not be done cutting deals after a big first trading day of 2012. The company was one of the the 5 most crazy company sellers since the financial crisis, and it's still got further asset spin plans.In September, Frac Tech, a shale gas drilling specialist partly owned by Chesapeake Energy planned an IPO to raise $1.15 billion, only to hold the offering on a weakened oil and gas services industry outlook in December. In the meantime, the Wall Street Journal reported last month that potential Chinese and Saudi bidders could offer up to $2 billion for Chesapeake's stake in the company, providing a big windfall. Chesapeake Chief Executive Aubrey McClendon said in November that the stake could be worth $3 billion. McClendon added that an IPO of Chesapeake's oilfield services unit could draw up to $7 billion, Bloomberg reports. Devon and Chesapeake's Tuesday sales were just two of many pending energy deals to watch for in 2012. Here are five other deals that are already in progress. 5. A Quicksilver Resources Barnett Shale Spin? In October, Quicksilver Resources (KWK) said it will sell interests in its Barnett Shale assets in a spinoff causing shares to rally and then sink. By creating a master limited partnership of roughly 18% of its shale assets in the Fort Worth, Texas- Barnett Shale, Quicksilver then expects to IPO the partnership in a tax free manner that is said could raise $400 million. With the funds, Quicksilver intends to retire almost half of its $940 million in callable debt by the end of 2012. "The creation of this MLP achieves several goals for Quicksilver. We believe we will be able to monetize a large maturing asset base at attractive prices which can eliminate all of Quicksilver's existing public debt over the next few years," said Glenn Darden, CEO of Quicksilver when announcing the deal. To be seen is whether an ensuing stock slump will cause Quicksilver Resources to reconsider the spin or look for different strategic alternatives. When the plan was unveiled Lazard Capital Markets' Drew Venker raised the question of whether Quicksilver could raise the money it projected via a spin. In another October note, Brian Corales of Howard Weil wrote, "This deal came as a bit of a surprise but is positive. KWK clearly needs to raise capital to reduce the Company's debt." Corales expected the company to raise money by entering a joint-venture in its interest in a Horn River Basin pipeline or selling its BreitBurn Energy Partners stake. Previously, chief executive Thomas F. Darden and his family had shown interest in taking the company private, but reversed course this March. The Darden family founded the Fort Worth -based Quicksilver in 1963 and took it public in 1999.
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