YOUNGSTOWN, Ohio – Chesapeake Energy Corp. CEO Aubrey McClendon said that a
$3 billion loan from Goldman Sachs Group and Jefferies Group gives the company
breathing room to complete asset sales it so desperately needs to pay off heavy
debt, and to help its transition toward developing its liquids gas
portfolio.
"It takes money to make money, and that's the case here," McClendon told investors and analysts during a conference call Monday.
The $3 billion loan would help repay money Chesapeake borrowed on its revolving line of credit, McClendon said. The injection of new capital would also allow the company to finish asset transactions scheduled for this year.
"We now have substantially enhanced our liquidity, and that will ensure that we can conduct our asset monetization transactions from a position of strength," McClendon said.
Chesapeake is looking to sell between $9.5 billion and $11 billion worth of assets this year. Some of that money would be used to pay off the $3 billion loan.
"Those transactions remain on track," McClendon said, dispelling rumors that a potential sale of the company's positions in the Permian and Mississippi line basins were in jeopardy. The company expects to complete those transactions sometime during the third quarter.
On Friday, Chesapeake's stock dropped 14% after the company filed a report that cautioned of a possible delay in asset sales. The company did put on hold a $1 billion volumetric production payment, or VPP, in the Eagle Ford shale in Texas, in which Chesapeake sells production of a well in advance to investors.
McClendon is at the center of a storm of shareholder criticism in the wake of reports that detailed perks granted to the CEO through a well participation program that allowed him to invest up to 2.5% in each well the company drilled. McClendon used his stakes in these wells to secure more than $1 billion in personal loans.
Chesapeake shares rebounded nearly 5% Monday to $15.52 per share, after The Wall Street Journal reported that billionaire investor and corporate raider Carl Ichon would disclose a sizeable investment in Chesapeake stock.
McClendon said that he believes Chesapeake holds assets that are worth between $50 billion and $60 billion.
"The question is when do we sell them and what's the right price?" he said. "The buyers are very large and there are a large number of them."
Chesapeake, the second-largest natural gas producer in the United States, is shifting its focus from a dry gas supplier and stepping up its exploration for liquids-rich gas in places such as the Utica shale in eastern Ohio.
Dry gas prices stand at 10-year lows and have forced Chesapeake and other companies to pull up rigs and drill in areas where more profitable wet gas such as butane, ethane and propane can be harvested.
Chesapeake is the largest single leaseholder in the Utica with 1.3 million acres under contract and is aggressively exploring Columbiana and Carroll counties in Ohio.
"We've got a lot of running room," McClendon said. "We've got a lot of things planned in June, we've got things planned in the third quarter and we'll just play it on out."
Copyright 2012 The Business Journal, Youngstown, Ohio.
"It takes money to make money, and that's the case here," McClendon told investors and analysts during a conference call Monday.
The $3 billion loan would help repay money Chesapeake borrowed on its revolving line of credit, McClendon said. The injection of new capital would also allow the company to finish asset transactions scheduled for this year.
"We now have substantially enhanced our liquidity, and that will ensure that we can conduct our asset monetization transactions from a position of strength," McClendon said.
Chesapeake is looking to sell between $9.5 billion and $11 billion worth of assets this year. Some of that money would be used to pay off the $3 billion loan.
"Those transactions remain on track," McClendon said, dispelling rumors that a potential sale of the company's positions in the Permian and Mississippi line basins were in jeopardy. The company expects to complete those transactions sometime during the third quarter.
On Friday, Chesapeake's stock dropped 14% after the company filed a report that cautioned of a possible delay in asset sales. The company did put on hold a $1 billion volumetric production payment, or VPP, in the Eagle Ford shale in Texas, in which Chesapeake sells production of a well in advance to investors.
McClendon is at the center of a storm of shareholder criticism in the wake of reports that detailed perks granted to the CEO through a well participation program that allowed him to invest up to 2.5% in each well the company drilled. McClendon used his stakes in these wells to secure more than $1 billion in personal loans.
Chesapeake shares rebounded nearly 5% Monday to $15.52 per share, after The Wall Street Journal reported that billionaire investor and corporate raider Carl Ichon would disclose a sizeable investment in Chesapeake stock.
McClendon said that he believes Chesapeake holds assets that are worth between $50 billion and $60 billion.
"The question is when do we sell them and what's the right price?" he said. "The buyers are very large and there are a large number of them."
Chesapeake, the second-largest natural gas producer in the United States, is shifting its focus from a dry gas supplier and stepping up its exploration for liquids-rich gas in places such as the Utica shale in eastern Ohio.
Dry gas prices stand at 10-year lows and have forced Chesapeake and other companies to pull up rigs and drill in areas where more profitable wet gas such as butane, ethane and propane can be harvested.
Chesapeake is the largest single leaseholder in the Utica with 1.3 million acres under contract and is aggressively exploring Columbiana and Carroll counties in Ohio.
"We've got a lot of running room," McClendon said. "We've got a lot of things planned in June, we've got things planned in the third quarter and we'll just play it on out."
Copyright 2012 The Business Journal, Youngstown, Ohio.
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