Chesapeake Energy Corp. has agreed in principle to repurchase all of the outstanding preferred shares of its unrestricted subsidiary, CHK Utica L.L.C. from third-party preferred shareholders.

Under the agreement, Chesapeake will pay approximately $1.26 billion to repurchase 1,060,000 preferred shares of CHK Utica. The proposed transaction, which is expected to close today, will retire Chesapeake’s highest cost leverage instrument and eliminate approximately $75 million in annual cash dividend payments to third-party preferred shareholders.

Domenic J. Dell’Osso Jr., Chesapeake’s Chief Financial Officer, commented, "We are very pleased with the performance of our Utica assets, and as we continue to execute on our strategy of eliminating financial complexity, we believe that this is an opportune time to repurchase the remainder of the CHK Utica preferred shares at a price that is accretive to net present value."

Chesapeake plans to fund the cash portion of the RKI acreage exchange and the repurchase of the CHK Utica preferred shares with available liquidity, including nearly $1.5 billion of unrestricted cash held on its balance sheet as of June 30, 2014. Chesapeake continues to refine its portfolio to focus on assets that best align with the company’s strategy of profitable growth from captured resources and expects to close additional sales of noncore assets, including non-E&P assets, by the end of 2014.