Chesapeake selling 504,000 DJ acres, production from 29 wells

OKLAHOMA CITY, Okla., Thu May 24, 2012 – Chesapeake Energy Corp. has put 504,000 acres in the DJ Basin in Wyoming and Colorado up for sale, as the U.S. energy company scrambles to raise cash to close a $9 billion to $10 billion funding shortfall.

The deal includes oil and gas production from 29 wells that the company operates and Chesapeake’s interest in 24 nonoperated wells, according to a prospectus on the deal.

Chesapeake, the nation’s second-largest gas producer behind Exxon Mobil Corp and for years one the most active gas drillers, sold off a third of its holdings in the region – then around 800,000 acres – to China’s CNOOC Ltd for nearly $1.3 billion in 2011.

The company faces a 2012 funding shortfall as natural gas prices are the lowest in a decade.

It has already announced that it is looking to sell its 1.5 million acres of lease holdings in the oil-rich Permian basin as well as find a joint venture partner in another liquids-rich region, the Mississippi Lime basin, in order to raise cash.

Analysts and investors have also called for change at the company after Reuters reported that CEO Aubrey McClendon had taken out more than $1 billion in loans using his interest in thousands of company wells as collateral.

Chesapeake shares were down 1.8 percent at $14.82 on Thursday afternoon on the New York Stock Exchange.

Chesapeake Energy shares fall on downgrade, loan

OKLAHOMA CITY, Okla., Tue May 15, 2012 – Chesapeake Energy Corp. shares dropped as much as 6.5 percent on Tuesday following a credit rating downgrade and news that the natural gas producer will boost its borrowings to $4 billion from the planned $3 billion as it faces a liquidity crunch.

The company, facing a funding shortfall of $9 billion to $10 billion this year, said on Friday that Goldman Sachs and Jefferies Group would provide it with $3 billion.

Chesapeake’s cash flows have shrunk as natural gas prices slumped to their lowest levels in a decade, putting pressure on the second-largest U.S. producer of the fuel to raise money to fund drilling operations.

Ratings agency Standard & Poor’s said it had cut Chesapeake’s credit rating to “BB-” from “BB,” one notch lower into noninvestment, or “junk,” status. S&P cited shortcomings in the company’s corporate governance practices, concerns about loan covenants and the likelihood of a wider gap between operating cash flow and capital expenditures.

Reuters reported last month that CEO Aubrey McClendon had borrowed at least $1.1 billion against his personal stakes in the company’s wells from lenders who also had dealings with Chesapeake, a deal that analysts and academics said raises possible conflicts of interest.

KKR, Chesapeake to partner in oil and gas investments

OKLAHOMA CITY, Okla. – Tue Mar 6: Private equity group KKR & Co. and Chesapeake Energy Corp. will form a partnership to invest in mineral and royalty interests in oil and gas assets in the United States, which the companies said will be seeded with $250 million.

Under the terms of the agreement, Chesapeake, the second-largest U.S. producer of natural gas, will contribute 10 percent of the initial investment and focus on finding, acquiring and managing royalty interests.

The deal highlights growing private equity interest in the energy sector and comes at a time when decade-low natural gas prices have forced producers to seek partnerships to bolster their depleted cash flows.

Last month, a consortium led by private equity firm Apollo Global Management struck a $7.15 billion deal to acquire El Paso Corp’s oil and gas exploration and production business.

Another private equity major Blackstone Group LP said it would invest $2 billion in Cheniere Energy Partners LP to help build Cheniere’s first export plant in Sabine Pass, Louisiana.

Chesapeake has said it would raise $10 billion to $12 billion from assets sales and joint ventures. The Oklahoma City-based company faces a funding gap in billions for next year and it needs to cobble together a series of deals to raise cash.

KKR said it is making the investment through its affiliates and KKR Financial Holdings LLC.

Chesapeake Energy Corp. targets new asset, debt sales

OKLAHOMA CITY, Okla. – Chesapeake Energy Corp said it would sell off $10 billion to $12 billion in assets and issue another $1 billion in debt to cover its spending this year amid the weakest natural gas prices in a decade.

To bolster its cash flow, the second-largest U.S. natural gas producer has been cutting production from “dry gas” wells and shifting to liquids-rich fields that produce products whose prices are based on that of crude oil.

Chesapeake said on Monday that it would put fields in Texas and Oklahoma as well as some midstream assets on the block and sell its future production in the Granite Wash field.

Investors initially welcomed the announcement. Shares of Chesapeake rose more than 5 percent in early trading, before falling back somewhat.

Chesapeake may find it difficult to get the prices it wants for the assets because of low prices for natural gas, which are hovering near $2.50 per million British thermal units, Brean Murray, Carret & Coone analyst Raymond Deacon said.

The low natural gas prices are also putting pressure on the company’s cash flow.

Analysts have said anticipated cash flows of about $5 billion in 2012 are likely to fall far short of Chesapeake’s spending needs of around $12 billion.

“They need to get those levels more in line,” Deacon said.

Chesapeake shares had slumped nearly 40 percent since their peak in August through last week, hurt by the weak gas prices. The company has promised to trim its debt to $9.5 billion by the end of the year from nearly $14.5 billion at the end of the third quarter.

Last week, Chesapeake said it had cut its gas output by 500 million cubic feet per day and was considering pulling production down by double that amount, a move that could help reduce spending.

Included in the expected deals are sales or joint ventures for the company’s West Texas Permian Basin assets and Mississippi Lime acreage in northern Oklahoma, which will yield $6 billion to $8 billion.

Chesapeake Energy says it’s still buying Utica properties

HOUSTON ― Chesapeake Energy Corp. is still buying acreage in Ohio’s Utica shale formation, CEO Aubrey McClendon said on Wednesday, but is facing increased competition there from companies such as Exxon Mobil and Hess Corp.

Chesapeake is the most aggressive buyer of land in the new U.S. shale formations, which are believed to hold massive reserves of natural gas and oil.

“Right now there’s still acreage to be acquired,” McClendon told reporters at the Jefferies & Co energy conference.

Chesapeake’s huge appetite for new property has left the company too debt-laden to pay for drilling, and forced it attract joint venture partners to help pay development costs.

McClendon earlier told the conference that the company still expected to close a joint venture worth $3.4 billion with a major international energy company by the end of 2011.

The company is expected to make an announcement later on Wednesday about a $750 million preferred share sale that it first announced on Nov. 3.

That sale of preferred shares is for its newly formed entity, CHK Utica LLC, which owns about 700,000 acres of leaseholds in the Utica shale.

Chesapeake will end its major acreage purchases next year, McClendon said, and is not interested in selling of its assets outright.

Shares in Chesapeake were up 4.3 percent to $24.80 on the New York Stock Exchange, lagging the gain of about 5.3 percent in the CBOE’s oil companies index.