Chesapeake filing may put asset sales in doubt
Chesapeake Energy Corp. may not be able to carry out up to $14 billion in planned asset sales because of low natural gas prices and its loan obligations.
Chesapeake Energy Corp. may have to put off some of its planned asset sales due to changing market factors and low natural gas prices, the company said Friday in its quarterly report.
“We do not have binding agreements for any of these monetization transactions, however, and our ability to consummate each of them is subject to changes in market conditions and other factors,” according to the quarterly report. “As a result, there can be no assurance that we will complete any of the planned transactions on a timely basis or at all.”
Investors reacted sharply, pushing Chesapeake's stock price to close the lowest since March 2009. The stock closed at $14.81 a share, down 13.8 percent, shedding $1.52 billion in value on the day, including $1.01 billion in the final 45 minutes of trading.
The stock's previous low over the past year had been $16.35 a share.
Late Friday, Chesapeake announced it has secured a $3 billion unsecured loan from Goldman Sachs Bank USA and affiliates of Jeffries Group Inc. to pay its debts. Chesapeake intends to use proceeds from planned asset sales to pay off the loan.
“This short-term loan from Goldman and Jefferies provides us with significant additional financial flexibility as we execute our asset sales during the remainder of 2012,” CEO Aubrey McClendon said.
Chesapeake aims to raise as much as $14 billion from asset sales and other deals because the company's planned drilling expenses are expected to exceed its projected cash flow.
The situation is complicated by some of the company's previous loan and investment deals, which require Chesapeake to meet drilling and production guarantees.
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