Chesapeake CEO resumes road shows as reprimand’s sting fades

Permian Sales

Chesapeake rose 0.3 percent to $19.25 at 10:34 a.m. in New York. The stock has declined 14 percent this year.

Institutional investors and analysts will be listening closely to McClendon’s remarks tomorrow for any announcements about pending sales of oil and gas fields in the Permian Basin that straddles the Texas-New Mexico border, said Tim Rezvan, an analyst at Sterne Agee & Leach Inc. in New York.

The Permian Basin sales are key to McClendon’s plan to pay off a $4 billion bridge loan from Goldman Sachs Group Inc. and Jefferies Group Inc. before the interest rate jumps to an effective rate of more than 10 percent in January. Investors also will be listening for any progress on McClendon’s effort to remake the second-largest U.S. gas producer into an oil company.

Rezvan, who has a neutral rating on Chesapeake’s stock, said it would be out of character for McClendon to announce details on asset sales tomorrow because the company normally couples such disclosures with quarterly earnings releases.

2012 Goal

McClendon said last month that the Permian Basin transactions and other unspecified deals to be completed by the end of September will amount to $7 billion in proceeds. That would bring total asset sales for the year to $11.7 billion, with three months left to meet his goal of selling $13 billion to $14 billion in properties in 2012.

U.S. gas futures traded in New York have risen almost 50 percent since touching a 10-year low in April. Gas for October delivery fell 1.5 percent to $2.812 per million British thermal units at 9:30 a.m , still shy of the $3.25 minimum Chesapeake said it needs in 2013 to generate positive cash flow. The company’s outlook also assumes crude will average $90 a barrel next year. Oil for October delivery settled at $95.30 a barrel on the New York Mercantile Exchange yesterday.

Chesapeake’s board has been investigating McClendon’s personal borrowings from some of the company’s largest financiers since April 26. Chesapeake hasn’t said when the inquiry will be concluded. Probes also are under way at the U.S. Securities and Exchange Commission and Internal Revenue Service.

Big Three

McClendon may have felt compelled to end his hiatus from conferences this week because Barclays’ annual CEO Energy-Power Conference is one of the three most prestigious events for energy CEOs, Rezvan said. Credit Suisse Group AG and Howard Weil Inc., a unit of Bank of Nova Scotia, sponsor the other two, he said.

“It’s a big one and you can’t really send a junior guy in your place,” Rezvan said.

The biggest catalyst for Chesapeake’s stock would be a higher price for gas, which accounts for about 80 percent of the company’s production, Gheit said.

U.S. gas producers “would need God himself to speak on their behalf to raise natural-gas prices,” Gheit said. “They need a lot more than Aubrey McClendon.”

Bloomberg News

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