Stock Market Watch

Chesapeake Energy Enters into Three Deals (CHK)

by ·


Chesapeake Energy CorporationChesapeake Energy Corp. (NYSE: CHK) announced on Monday that it has entered three deals which will help in raising $2.6 billion. The cash infusion was urgently needed by the oil and gas company as it faces funding shortfall this year.

Lately, most oil and gas companies including Chesapeake with strong exposures to decade low natural gas prices are putting more capital on oil drilling and explorations on pricier natural gas with high liquids content.


Commenting on the deal, Scott Hanold, an oil and gas analyst at RBC Capital Markets, said “It’s pretty clear that Chesapeake needs to raise a significant amount of cash this year”.

In order to fund its drilling and narrow down its financial gap-which analysts believe as up to $ 6 billion- the company said that it will close $10 billion to $12 billion in deals on its oil and gas assets.

The company has struck a deal of $475 million with one of the affiliates of Morgan Stanley. The deal called as called a volumetric production payment (VPP), will enable Chesapeake to receive upfront cash for future oil and gas production in a 10-year agreement linked to some of the company’s reserves and assets in the Granite Wash in Oklahoma.

Chesapeake raised another $1.25 billion through selling preferred shares in a subsidiary called CHK Cleveland Tonkawa LLC.

In another transaction, the Oklahoma City based company raised $590 million by selling 58, 4000 acres in Oklahoma to a subsidiary of Exxon Mobil Corp. (NYSE: XOM).

The energy company is heavily indebted relying heavily on VPPs and preferred shares deals to funds its operations, lately. Nevertheless, many analysts term these kinds of deals as debts because they involve future obligations.

Meanwhile, reacting to the company’s announcement, Chesapeake shares climbed to $21.80 in post-close trading, up from a New York Stock Exchange close of $21.47.

More Posts by this author

edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


Tags:

Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

You may also like...