On Thursday, shares of independent oil and gas company Chesapeake Energy Corp. (CHK Quick QuoteCHK - Free Report) are rising, up almost 5% in midday trading after the company announced it will sell its Barnett Shale operating area in North Texas to Saddle Barnett Resources for an undisclosed amount.

Saddle Barnet is backed by private-equity and infrastructure investment firm First Reserve.

Chesapeake expects the deal to increase its operating income by roughly $200 to $300 million every year from 2016-2019. It will also reduce the remaining gathering, processing, and transportation costs from 2016 by approximately $250 million, including $170 million for an expected minimum volume commitment shortfall payment.

The deal is also set to eliminate future Barnett Shale midstream and downstream commitments of about $1.9 billion.

"Today's announcements mark a major step in our continued progress to transform Chesapeake. Given the significant negative cash flow profile of the Barnett assets, the net cash paid out in these transactions has a payback of less than 18 months, and it will be partially funded by the $146 million sale and assignment of our long-term gas supply contract," said Chesapeake CEO Doug Lawler.

Included in the transaction, Chesapeake will pay Williams Partners , a pipeline operator, $334 million in order to end their current gathering agreement. In addition to this payment, Chesapeake has renegotiated its gas gathering agreement with Williams in its Mid-Continent area in exchange for $66 million.

The deal is expected to close in the third quarter of 2016.

Currently, CHK holds a #3 (Hold) and is up 6.67% year-to-date.

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