Chesapeake Energy Corp. will have the cash it needs to fund its current drilling budget and complete its transition to oil production by 2014, CEO Aubrey McClendon said in a conference call Monday morning.
McClendon clarified a series of announcements late Friday that startled investors and caused the company's stock price to lose more than $1 billion in value in about 45 minutes.
Chesapeake filed its first quarter report Friday, a day after it had been due. That evening, the company announced it had agreed to a $3 billion unsecured loan.
“The Goldman and Jefferies term loan will provide us with greatly enhanced financial flexibility,” McClendon said Monday.
McClendon also said the company has had strong interest in its planned asset sales and has had to cut off the number of buyers interested in Chesapeake's Permian Basin holdings in the “double digits.”
“We expect those transactions to close in the third quarter, and we will use the proceeds from those transactions to pay off the Goldman and Jefferies loan,” McClendon said. “We also plan to sell sufficient noncore assets in 2013 to make sure we are well-funded next year as we complete our natural gas-to-liquids transition and reach our goal of being cash-flow positive in 2014.”
Chesapeake has chosen to delay or cancel its planned volumetric production payment for the Eagle Ford shale, instead opting to go with the $3 billion loan.
“We decided this unsecured $3 billion term loan, which will provide a long runway into 2012 and allows us to complete our asset monetization from a position of strength was the right way to go,” McClendon said. “That's what we've done. We've applied the proceeds to our (revolving credit facility). We have a lot of room. We have a lot of things planned for June. We have things planed in the third quarter. We'll just play it on out.”
McClendon and Chief Financial Officer Nick Dell'Osso spent much of the 67-minute call detailing the strengths of the embattled company.
McClendon pointed out that even without the assets the company is trying to sell, Chesapeake owns “assets easily identifiable as being worth at least $50 billion to $60 billion” even though the company's enterprise value is now about half that.
McClendon also sought to reassure investors of his personal involvement in the company's transition and recovery.
“There could be no CEO in America today more determined and motivated than I am to deliver the value of its company's assets to its shareholders,” McClendon said. “I do understand fully where we are, where we have been and also where we are going. I am 100 percent confident that our asset harvest strategy will deliver great value to Chesapeake investors in the quarters and years ahead.”
McClendon also addressed reports that activist investor Carl Icahn may be buying a significant stake in the company.
“We wouldn't be surprised if Carl became a large shareholder,” McClendon said. “He did in 2010. Within six months, the stock went up 50 percent. He made over $500 million and called me to thank me when it was all over. I have a good relationship with Carl. If he comes in, I'm pretty confident that he'll make a lot of money.”