Analyst: Chesapeake may have to sell 'prized assets'

Chesapeake Energy Corp. may have to sell some of its “prized assets” to meet debt obligations, Jefferies analyst Biju Perincheril said in a report issued Tuesday.

Chesapeake executives have said the company plans to sell $9.5 billion to $11 billion in assets by the end of the year to meet debt obligations and fund its planned increased oil production.

Perincheril said Tuesday that the company needs $7 billion in sales this year and another $2 billion next year just to meet its debt obligations. The analyst said he expects Chesapeake to receive about $5 billion for its sale of assets in the Permian basin and another $500 million for a joint venture in the Mississippian formation of northern Oklahoma.

Beyond these, there is not much visibility,” Perincheril said. “Therefore, the company may have to part ways with a portion of its more lucrative undeveloped acreage in the Eagle Ford or Utica.”

Over the longer term, Perincheril said the company “needs to exhibit stricter financial discipline in order to regain investor confidence.” He praised Chesapeake’s plan to hire an independent chairman and supported activist shareholder Carl Icahn’s plan for direct shareholder representation on the board.

We are hopeful that with stronger oversight, Chesapeake will demonstrate more sustained financial discipline in the future,” Perincheril  said.

Perincheril has a “buy” rating for Chesapeake with a target stock price of $26.00. Chesapeake stock gained 54 cents, or 3.4 percent, Tuesday to close at $16.35.