Chesapeake Energy Corp.
) announced that it has priced its public offering of $3.0
billion in aggregate principal amount of its senior notes at par.
The notes will be issued in two separate series of notes, namely,
$1.5 billion in Floating Rate Senior Notes due 2019 that will
bear interest at LIBOR plus 3.25% and be reset quarterly, and
$1.5 billion in 4.875% Senior Notes due 2022. Chesapeake expects
the issuance and delivery of the two series of senior notes to
occur on Apr 24.
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The company plans to use the net proceeds from the offering to
repay its existing unsecured term loan, and redeem its 6.875%
Senior Notes due 2018. Any remaining portion of the net proceeds
will be used for general corporate purposes.
Chesapeake - an independent oil and gas company - registered a
significant fall in natural gas price realizations during the
fourth quarter. Average realizations for natural gas were $1.90
per per thousand cubic feet (Mcf) compared with $2.07 per Mcf in
the year-earlier quarter. Also, oil was sold at $89.58 per
barrel, down from the year-ago price of $92.23 per barrel.
Chesapeake plans to invest heavily in the development of its
liquids-rich holdings in the Eagle Ford Shale, Granite Wash and
Mississippi Lime. The company's daily production for the reported
quarter averaged approximately 665,100 barrel of oil equivalent,
an increase of 2% from the 2012 fourth quarter and 1% decrease
from the 2013 third quarter. This decrease is primarily due to a
planned reduction in well connections.
Severe weather also impacted the company's production in October
and December. Average daily production in the fourth quarter
consisted of approximately 111,300 barrels per day (Bbl/d) of
oil, 63,700 Bbls of NGL and 2.9 billion cubic feet of natural
gas. As the company shifts its focus to more liquid-rich plays,
it expects natural gas production to fall in 2014, while liquids
production is expected to increase approximately 14-18% year over
year. For 2014, Chesapeake expects capital expenditure in the
range of $5,200-$5,600 million.
However, Chesapeake's results are vulnerable to fluctuations in
the natural gas market, since natural gas accounted for about
three-fourth of its 2013 production.
Chesapeake Energy currently retains a Zacks Rank #3 (Hold),
implying that it is expected to perform in line with the broader
U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked players in the energy
World Point Terminals, LP
Range Resources Corporation
Helmerich & Payne, Inc.
). All these stocks sport a Zacks Rank #1 (Strong Buy).