Chesapeake Energy, the second-largest exploration company in the Fayetteville Shale play, said last week (Feb 7, 2011) that it plans to sell off $5 billion worth of assets in the region.

But why is Chesapeake getting out of the natural gas reserves so soon?

The news that Chesapeake Energy of Oklahoma city was putting its Fayetteville Shale assets up for sale didn't surprise many analysts.

The publicly traded company reported last fall that it was nearly $15 billion in debt, and was looking for ways to pay off over $4 billion by next year.

Chris McGill of the American Gas Association calls what Chesapeake is doing "flipping", a common process where a company sells its investments to change its cash position, before its long-term goals come to fruition.

Chesapeake's biggest competitor is Southwestern Energy, a Houston company that is the largest corporation working in the Fayetteville Shale.

It isn't known precisely how Chesapeake's acreage matched up against Southwestern's, but with a decline in natural gas prices since exploration first began, it's not surprising to see that both companies are looking at a lower return than expected when exploration first began.

So who is expected to buy up Chesapeake's assets?

The gas company won't say, but analysts believe Exxon Mobil could be a possible candidate.

As a much larger company, Exxon can afford the opportunity to wait out the early drilling, coming in at this later stage and benefiting from technology that's already been established.
Chesapeake says it expects the sale of its shale assets to be completed sometime between now and June 30, 2011.