Chesapeake Asset Sales

Could Cover Company Deficit


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By Swagato Chakravorty
Wednesday, August 8th, 2012

Chesapeake Energy Corp. (NYSE: CHK) has been embattled for some time; the company has a $10 billion deficit this current year in addition to regulatory problems unleashed by several Reuters investigations.

However, their second-quarter results, released Monday, suggest that the company may be able to pull through relying on increased crude production and sales of assets.

The company is about to close three deals in West Texas later this year. In the first half of this year, Chesapeake sold $4.7 billion, and it is looking at another $7 billion in sales to be announced by the year’s end. All this news caused company shares to rise around 3 percent after normal trading closed on Monday. It was up an additional 3.1% to $19.97 on Wednesday afternoon.

The domestic oil glut has caused low natural gas prices for a while, which has hurt the company’s bottom line. However, second quarter reports indicated Chesapeake’s oil and natural gas liquids production was up by almost 65 percent, with more increases to come.

From Reuters:

"Overall, I would say the quarter probably wasn't as bad as people thought," said Mark Hanson, an energy analyst at Morningstar. "You've got liquids production going up, which is a sign that they are aggressively going after them. That could be the influence of Icahn."

Earlier Reuters investigations into Chesapeake’s operations proved troublesome for the company when the SEC and Department of Justice decided to keep a close eye on them.

At the end of June, Chesapeake claimed reserves of up to 17.4 trillion cubic feet, which is lower by almost 7 percent from the same time last year, Reuters says. The quarter’s profit was $929 million, or $1.29 a share. This is an improvement from the previous year’s 68 cents per share going rate. Revenues were also up to $3.4 billion compared to the previous year’s $3.3 billion.

It is expected that Chesapeake asset sales will amount to roughly $14 billion for the year.


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