Oklahoma-based oil and gas producer
Chesapeake Energy Corporation
) has postponed its planned asset sale to ensure that terms and
conditions set forth by its creditors are not jeopardized.
Per the Fitch Ratings estimate, Chesapeake faces a funding gap
of $10 billion in 2012. In order to reduce its debt, the company
had planned to raise about $14 billion by divesting its assets and
through further deals.
But Chesapeake reasoned that while the monetization of its
assets would ease its funding problems, it would, at the same time,
decrease its cash flow and the worth of security used to back its
Thus, in compliance of its credit facility, the company plans to
delay its assets sale or choose some other asset for divestment. As
Chesapeake anticipates expenses on its wells and assets to be
around $23.1 billion in 2012 and 2013, it plans to fund the
majority of this expense through asset monetization.
The massive fall in natural gas prices in 2011 has created a
huge funding gap for Chesapeake. To overcome this problem,
Range Resources Corporation
) is constantly making efforts to shift to oil production from
Chesapeake had initiated a 25/25 plan to reduce its long-term
debt (through monetizing its assets and a reducing in lease-hold
spending) by 25%, while increasing its natural gas and oil
production by the same percentage for 2012.
Per the Zacks Consensus, Chesapeake's earnings per share for the
year 2012 and 2013 are estimated at $0.75 and $1.92, respectively.
This represents a decline of 73.2% in 2012 and a growth of 155.5%
Chesapeake holds a Zacks #5 Rank, which is equivalent to a
Strong Sell rating for a period of one to three months. Longer
term, we maintain our Neutral recommendation on the stock.
CHESAPEAKE ENGY (CHK): Free Stock Analysis
CONOCOPHILLIPS (COP): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
To read this article on Zacks.com click here.