UPDATE 7-Chesapeake gets breathing room with $6.9 bln asset sale

* To sell Permian acreage to Shell, Chevron
* Pipeline network sold for $3 billion
* Still seeking Mississippi Lime joint venture partner
* Reached 85 percent of 2012 asset sale goal-CEO
* Chesapeake shares slip 1 percent

By Ernest Scheyder and Michael Erman
Sept 12 (Reuters) - Chesapeake Energy Corp's $6.9
billion deal to sell gas fields and pipelines should help
stabilize the troubled company for the rest of the year and give
it time to figure out how it will fund 2013 operations.
With agreements to sell most of its assets in the Permian
Basin to Royal Dutch Shell Plc and Chevron Corp
, as well as nearly all of its remaining infrastructure
network, Chesapeake will now have to rely more heavily on a
smaller number of assets to grow.
Chief Executive Aubrey McClendon built Chesapeake into the
second-largest natural gas producer in the United States through
aggressive land purchases and development of so-called
unconventional resources around the country. But the company has
been struggling recently due to slumping natural gas prices, as
well as controversial land deals in Michigan and personal loans
taken out by McClendon.
Chesapeake has been selling assets this year to meet an
estimated $10 billion funding gap. It plans to use some of the
proceeds from Wednesday's announcement to trim its $14.33
billion debt load by $4 billion. The company's market value is
roughly $13.27 billion.
The deals keep the company afloat for 2012. Still, they do
not significantly close the gap between the amount Chesapeake
needs to spend in the future to maintain its current growth and
its projected revenue.
Chesapeake will need to fill a funding gap of at least $4
billion in 2013, Barclays analysts estimate.
"They are fine from a funding point of view for 2012," said
Morningstar analyst Mark Hanson, who estimates the company will
finish the year with a surplus.
He estimated that based on the company's current growth
plan, "they are in the hole already for 2013 ... They probably
need to sell a not insignificant amount of assets in 2013 to
plug that gap."
The company sold its pipeline network for more than analysts
had expected, but got less for its Permian assets than expected,
Argus Research analyst Phil Weiss said.
"When you look at the acquirers - Chevron and Shell - I
certainly wouldn't expect them to overpay," Weiss said.
The company holds 1.5 million acres in the Permian Basin, a
vast source of oil and natural gas in the western part of Texas
and southeastern New Mexico.
"There's no way at this point in time to know what these
reserves are really worth," said David Dreman, chairman of
Dreman Value Management, which owns about 1 million shares of
Chesapeake. "It doesn't look like this was a buyers war."
Chesapeake's Permian sales work out to about $3,200 per
acre, less than half the $7,500-an-acre average that sellers in
the Permian had reaped in 10 previous sales during 2011 and
2012, said Morningstar analyst Mark Hanson.
Given the quality of Chesapeake's assets in the Permian,
though, Hanson had expected a price of around $3,750 an acre.
Chesapeake's shares fell 1 percent to at $19.89 on
Wednesday. The stock has dipped 10.8 percent so far this year.

The deal is part of the company's strategy to shift away
from cheap natural gas into more lucrative crude oil. It also
comes after a Reuters report in June showed Chesapeake and
Encana Corp had colluded in 2010 to avoid bidding
against each other in Michigan land deals.
That report has led to an investigation by the U.S.
Department of Justice into possible criminal antitrust
violations.

'SIGNIFICANT STEPS'
Chesapeake's chief executive, Aubrey McClendon, said the
company had reached about 85 percent of its goal to sell $13
billion to $14 billion of assets this year.
"These transactions are significant steps in the
transformation of our company's asset base to a more balanced
portfolio among oil, natural gas liquids and natural gas
resources and production," McClendon said in a statement.
Chesapeake has been working to sell assets in the Permian
Basin since February. Depressed natural gas prices have crimped
cash flow at Chesapeake and many other energy companies, leaving
asset sales as a good way to raise cash.
Chesapeake is selling about 618,000 acres in the southern
Delaware Basin portion of the Permian Basin to Shell, which said
it is paying $1.94 billion.
Another 264,000 acres in the Permian is being sold to
Chevron. Terms of that deal were not disclosed
Chesapeake is keeping 470,000 acres in the Permian.
In total, Chesapeake is raising about $3.3 billion from the
sale of Permian Basin assets.
Chesapeake said in May that more than 10 companies had
looked at the Permian acreage. Investment bankers said some
potential buyers had blanched at the assets because of concerns
about levels of natural gas liquids in the package as well as
the need for an aggressive drilling program to hold on to some
of the land.
Also Wednesday, Chesapeake said it would raise $3 billion
from selling nearly all of its remaining pipeline and related
assets in several transactions.
The company previously announced the largest of the
transactions - a $2.7 billion deal pending with Global
Infrastructure Partners - when it signed a letter agreement with
the infrastructure company in June. It said then
that the deal would bring in more than $2 billion.
The company is also selling some land in Ohio's Utica shale
formation for some $600 million in four separate deals. After
the deals close, Chesapeake will have about 1.3 million acres
left in the Utica.

MISSISSIPPI LIME
Chesapeake is still looking for a joint venture partner for
its holdings in the Mississippi Lime in Oklahoma and Kansas. It
said earlier this year that its total holdings there could be
worth $14 billion to $16 billion, based on an assumption of
$7,000 to $8,000 an acre.
Joint ventures have been quite popular with foreign
companies looking to gain a foothold in and expertise with North
American shale plays.
But one investment banker said that there is currently "a
little bit of 'JV fatigue,'" in the energy industry, noting that
some companies might be wary of linking up with the precariously
positioned Chesapeake.
"I think that's very true as it relates to Chesapeake, which
has a bit of an asterisk beside their name at this point. I
think people have found their experience with Chesapeake has
been unrewarding," said the banker, who spoke on the condition
of anonymity due to lack of approval to speak on the record..
Reuters reported earlier this year that McClendon has taken
$1.1 billion in personal loans against his stakes in Chesapeake
wells during the past three years.
The loans, which came mostly from an investment management
company that also did business with Chesapeake, had not been
disclosed to shareholders. The Securities and Exchange
Commission and the Internal Revenue Service have launched
inquiries.