CHESAPEAKE ENERGY CORPORATION, DELFIN LNG AND GUNVOR SIGN LONG-TERM LNG LIQUEFACTION OFFTAKE AGREEMENT INDEXED TO JAPAN KOREA MARKER
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Insights
The executed Sales and Purchase Agreements (SPA) between Chesapeake Energy Corporation and Delfin LNG LLC, with Gunvor Group Ltd as the intermediary, is a significant transaction in the LNG market. This deal, involving the long-term liquefaction offtake of approximately 0.5 mtpa of LNG, is anchored to the Henry Hub pricing, which is a benchmark for natural gas pricing in the United States. The contract's linkage to the Japan Korea Marker (JKM) for the sales price indicates a strategic move to capitalize on the Asian LNG demand, which often commands a premium over other markets.
From a financial perspective, the SPA provides Chesapeake with a diversified revenue stream and exposure to global LNG pricing, potentially enhancing its financial stability and shareholder value. The long-term nature of the deal, spanning 20 years, suggests a strong commitment to the LNG market and could be indicative of Chesapeake's confidence in the sustained demand for cleaner-burning fuels. The environmental benefits, as hinted by the reduced carbon footprint, align with global energy transition trends, potentially improving Chesapeake's corporate image and market positioning among environmentally conscious investors.
The emphasis on 'Be LNG Ready' by Chesapeake's President and CEO reflects a broader industry movement towards LNG as a lower-carbon alternative to other fossil fuels. The environmental implications of this deal are noteworthy, as LNG is often touted as a transition fuel in the move towards a more sustainable energy mix. Delfin's CEO highlighted the reduced environmental footprint of their unique liquefaction solution, which could be a reference to innovative technologies or processes that mitigate the environmental impact of LNG production and transport.
For stakeholders concerned with environmental policy and regulation, this deal demonstrates a proactive approach by Chesapeake and Delfin to align with stricter emission standards and to potentially benefit from policy incentives aimed at reducing greenhouse gas emissions. The partnership may also serve as a model for other energy companies looking to adapt to a changing regulatory landscape while maintaining profitability and market relevance.
This SPA highlights the interconnectedness of global energy markets and the strategic importance of LNG trade routes. The FOB (Free On Board) delivery terms indicate that Chesapeake will bear the cost and risk of delivering LNG to Gunvor, which then takes ownership of the cargo. This arrangement necessitates a robust logistics strategy, as noted by Gunvor's Co-Head of LNG Trading, who mentioned the use of their fleet for competitive logistics services.
The deal's impact on international trade is multifaceted. It strengthens the U.S. position as a key LNG exporter, contributes to the diversification of supply sources for U.S. allies and enhances energy security for importing countries. The 20-year duration of the agreement underlines the long-term strategic planning involved in international energy trade and the importance of building enduring trade relationships. Additionally, the reference to supplying 'markets in need' underscores the geopolitical significance of energy exports, particularly in regions where energy supply is a critical factor in economic stability and growth.
Under the SPA, Chesapeake will purchase approximately 0.5 million tonnes ("mtpa") of LNG per annum from Delfin at a Henry Hub price and contract targeted start date in 2028 then deliver to Gunvor on an FOB basis with the sales price linked to the Japan Korea Marker ("JKM") for a period of 20 years. These volumes will represent 0.5 mtpa of the previously announced up to 2 mtpa HOA with Gunvor.
Nick Dell'Osso, Chesapeake President and CEO, said, "Today's announcement cements an important step on our path to 'Be LNG Ready' and is further recognition of the depth of our portfolio and strength of our financial position. We are pleased to formalize our agreement which provides diversification and access to global LNG pricing while enabling the delivery of affordable, reliable, lower carbon energy to markets in need."
Dudley Poston, Delfin CEO, said: "We are excited to partner with a premier company like Chesapeake. We believe our unique liquefaction solution provides Chesapeake with commercial flexibility with a reduced environmental footprint, while providing a much-needed source of additional supply to key US allies and the global LNG market."
Kalpesh Patel, Co-Head of LNG Trading and a member of the Executive Committee of Gunvor, said, "This deal represents an important step in finalizing the 0.5 mtpa out of our total of 2.0 mtpa arrangement with Chesapeake, while expanding our existing cooperation with Delfin. We continue to provide reliable and competitive logistics services to our partners by utilizing our fleet consisting of vessels procured via term charters and equity ownership. Gunvor looks forward to establishing additional agreements with the companies in the near future."
About Chesapeake:
Headquartered in
About Delfin:
Delfin is a leading LNG export infrastructure development company utilizing low-cost Floating LNG technology solutions. Delfin is the parent company of Delfin LNG LLC ("Delfin LNG") and Avocet LNG LLC. Delfin LNG is a brownfield Deepwater Port requiring minimal additional infrastructure investment to support up to four FLNG Vessels producing up to 13 million tonnes of LNG per annum. Delfin purchased the UTOS pipeline, the largest natural gas pipeline in the Gulf of
About Gunvor:
Gunvor is one of the world's largest independent commodities trading houses by turnover, creating logistics solutions that safely and efficiently move physical energy from where it is sourced and stored to where it is demanded most. Gunvor has strategic investments in industrial infrastructure — refineries, pipelines, storage and terminals — that complement our core trading activity and generate sustainable value across the global supply chain for our customers. The company, which in 2021 generated U.S.
Forward-Looking Statements
This release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements other than statements of historical fact and include, but are not limited to, our ability to "Be LNG Ready" and to provide diversification and access to global LNG pricing while delivering affordable, reliable, lower carbon energy to markets in need. Forward-looking statements often address our expected future business, financial performance and financial condition, and often contain words such as "expect," "could," "may," "anticipate," "intend," "plan," "ability," "believe," "seek," "see," "will," "would," "estimate," "forecast," "target," "guidance," "outlook," "opportunity" or "strategy." Although we believe the expectations and forecasts reflected in our forward-looking statements are reasonable, they are inherently subject to numerous risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. No assurance can be given that such forward-looking statements will be correct or achieved or that the assumptions are accurate or will not change over time.
Factors that could cause our actual results to differ materially from expected results include those described under "Risk Factors" in Item 1A of our annual report on Form 10-K and any updates to those factors set forth in Chesapeake's subsequent quarterly reports on Form 10-Q or current reports on Form 8-K which are available on its website at http://investors.chk.com. These risk factors include: the impact of inflation and commodity price volatility resulting from instability in
We caution you not to place undue reliance on the forward-looking statements contained in this release which speak only as of the date of this release, and we undertake no obligation to update this information, except as required by applicable law. We urge you to carefully review and consider the disclosures in this release and our filings with the SEC.
INVESTOR CONTACT: | MEDIA CONTACT: |
Chris Ayres (405) 935-8870 ir@chk.com | Brooke Coe (405) 935-8878 media@chk.com |
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SOURCE Chesapeake Energy Corporation
FAQ
What is the nature of the LNG export deal announced by Chesapeake Energy Corporation (CHK)?
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