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Chesapeake Energy's Asset Sell-Off

Written By Brianna Panzica

Posted February 13, 2012

Natural gas prices are down, and Chesapeake Energy (NYSE: CHK) is looking to cover spending.

The company plans to raise between $10 and $12 billion this year by selling assets and issuing $1 billion in debt.

Chesapeake began feeling financial strain with the drop in natural gas prices, and in order to avoid serious problems, the company found it necessary to cut back.

And it has outlined a plan for raising this money.

One part of this plan includes volumetric production payment, or VPPs. This means Chesapeake will get cash now for future deliveries of oil and gas.

Another is a plan for a subsidiary for its Cleveland and Tonkawa assets, for which it will issue “perpetual preferred shares.”

These two actions should bring in a total of $2 billion, though Chesapeake must follow up with its own actions in the future to seal the deals.

Chesapeake has also planned to sell assets in the Mississippi Lime and in the Permian Basin.  The sale of this acreage could bring in anywhere between $6 billion and $8 billion.

And then there’s a third part of the plan.  Chesapeake will create a spinoff company consisting of the service company and pipeline sectors. This should bring in around $2 billion.

Blair Thomas of EIG Global Energy Partners exhibits faith in the company’s leader:

“It’s an ambitious agenda.  But [Aubrey McClendon] is one of the most remarkable value creators in the oil and gas sphere.  People underestimate him at their peril.”

Some of these deals should take off fairly soon, as the company hopes to raise the money within the year.

Chesapeake was up 2.12% to $22.60 on Monday afternoon.

That’s all for now,


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