HOUSTON (Reuters) - Chesapeake Energy Corp CHK.N plans to sell all of its Ohio natural gas acreage to privately owned Encino Acquisition Partners for about $2 billion, the company said on Thursday.

Chesapeake Energy Corporation's 50 acre campus is seen in Oklahoma City, Oklahoma, on April 17, 2012. REUTERS/Steve Sisney

The Oklahoma City-based oil and gas producer said it will use the proceeds to pay off debts, which totaled about $9.83 billion at the end of March. The deal is expected to close in the fourth quarter.

Chesapeake has been shedding assets and employees since a 2013 governance crisis led to the departure of co-founder and former Chief Executive Officer Aubrey McClendon, who died in an auto accident in 2016.

The sale of Chesapeake’s entire stake in the Utica shale will strengthen the company’s balance sheet and further shift its focus from gas production to oil, Chesapeake CEO Doug Lawler said in an interview.

“We will absolutely be driving for a greater percentage of oil production in our portfolio,” Lawler said. “We hope to achieve that through organic growth, exploration and future acquisitions.”

The sale to Houston-based Encino Acquisition Partners includes 320,000 net acres in Ohio’s Utica shale and 920 wells that currently produce about 107,000 barrels of oil equivalent per day. Encino is backed by the Canadian Pension Plan Investment Board and Encino Energy.

The purchase price includes a $100 million contingent payment based on future natural gas prices.

The transaction is part of Chesapeake’s plan to pay down debts that had ballooned to as much as $16 billion in 2012 after a string of land acquisitions just before U.S. natural gas prices tumbled.

The company, which had said it expected to cut debt by between $2 billion and $3 billion this year, plans additional small asset sales and expects to use cash flow from higher output at existing fields to shave debt, Lawler said.

Chesapeake expects it will be able to replace the cash flow from its acreage in the Utica within a year by investing in other assets, particularly in the Powder River Basin in Wyoming. Those assets, which the company acquired about a decade ago, had once been on Chesapeake’s chopping block.

By drilling longer horizontal wells and using better completion technology, the Powder River Basin has proven a lucrative investment, Lawler said. Chesapeake also is considering growing output by acquiring new acreage elsewhere.

“We’ll look for opportunity,” Lawler said.

Chesapeake also said its 2019 oil production is expected to rise about 10 percent from 2018, adjusted for asset sales, with additional oil growth anticipated in 2020.