Chesapeake puts assets up for sale to cover expenses

Does natural gas have a secret admirer?

Chesapeake Energy is planning to sell $10-12 billion in assets and issue $1 billion in debt as it looks to cover expenses in the face of low natural gas prices. The asset sale comes after the company cut its dry gas production, moving towards liquids-rich fields, whose prices are based off of crude oil. Last week, it announced it had cut its gas output by 500 million cubic feet per day and was considering pulling production by another billion cubic feet per day in an effort to reduce spending.

The company plans to put fields in Texas and Oklahoma as well as some midstream assets up for sale and to sell its future production in the Granite Wash field. Assets in Oklahoma are expected to generate $2 billion while its Texas assets are expected to raise $6-8 billion.

One Wall Street Analyst said that Chesapeake mar struggle to receive favorable pricing for the assets because of the low price of natural gas, but that the company needs to do something to cover its $12 billion in spending needs. Currently, the company is estimated to have cash flows of roughly $5 billion in 2012.

Chesapeake Energy (CHK : NYSE : US$22.66), Net Change: 0.53, % Change: 2.39%, Volume: 29,751,330

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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