(Source: Business Wire)Chesapeake Energy Corporation (NYSE:CHK) today announced it has entered into a definitive agreement to form a joint venture on a portion of its midstream assets with Global Infrastructure Partners (GIP), a New York-based private equity fund. As part of the transaction, Chesapeake will contribute certain natural gas gathering and processing assets into a new entity, Chesapeake Midstream Partners, L.L.C. (CMP), and GIP will purchase a 50% interest in CMP. Chesapeake will retain the remaining 50% interest in CMP and receive $588 million in cash from GIP. The assets Chesapeake will contribute to the joint venture are substantially all of its midstream assets in the Barnett Shale and also the majority of the company's non-shale midstream assets in the Arkoma, Anadarko, Delaware and Permian Basins. Closing of the transaction is anticipated to occur later this month.

CMP will enter into various agreements with Chesapeake, including a long-term gas gathering agreement at rates consistent with current market pricing. CMP will focus on unregulated business activities in service to both Chesapeake and third-party natural gas producers and its revenues will be generated almost entirely from fixed fee-based arrangements for gathering, compression, dehydration and treating services.

J. Mike Stice, Chesapeake's Senior Vice President for Natural Gas Projects, will serve as Chief Executive Officer of CMP. Additionally, CMP intends to expand its management team by adding a Chief Operating Officer and Chief Financial Officer in the next few months. In order to ensure continuity of service, performance and efficiency, the CMP assets will continue to be operated by existing Chesapeake employees through an Employee Secondment Agreement. In return for certain cost reimbursements, CMP will utilize various support functions within Chesapeake, including accounting, human resources and information technology.

Chesapeake will continue to operate its midstream assets outside of the CMP joint venture in a separate company, Chesapeake Midstream Development, L.P. (CMD), which will include natural gas gathering assets in the Fayetteville Shale, Haynesville Shale, Marcellus Shale and other areas in Appalachia.

Concurrent with GIP's funding of its interest in the joint venture, CMP is scheduled to close a new $500 million secured revolving bank credit facility agreement that matures in September 2012. CMP plans to utilize the facility to partially fund capital expenditures associated with the building of additional natural gas gathering systems and for general corporate purposes.