AerospaceHuman ResourcesArchitectureInnovationBanking & FinanceNonprofitsConstructionReal EstateEconomy RetailEducationSales & MarketingEnergyTechnologyGovernmentTransportationHealth Care
Chesapeake Energy Corporation today provided details on its financial plan to fully fund the company’s anticipated capital expenditures during 2012 and provide additional liquidity for 2013. The company is also projecting that its rapidly increasing liquids production will enable it in 2014 to reach equilibrium between its cash flow from operations and its planned drilling and completion capital expenditures.
First, Chesapeake anticipates receiving total proceeds in the next 60 days of approximately $2 billion in two separate transactions. The company plans to complete a volumetric production payment on its Texas Panhandle Granite Wash assets and a financial transaction (similar to the company’s recent CHK Utica financial transaction) by a new unrestricted subsidiary formed to hold a portion of Chesapeake’s assets in Ellis and Roger Mills counties, Oklahoma, in the Cleveland and Tonkawa plays.
In addition, the company is pursuing joint venture transactions in its Mississippi Lime and Permian Basin plays where it owns 1.8 million and 1.5 million net acres of leasehold, respectively. Chesapeake has also recently received industry inquiries about a complete exit from the Permian Basin and today is announcing that it may consider a 100% sale of its Permian Basin assets if it receives a compelling offer. Chesapeake’s acreage ownership in the Permian Basin is one of the six largest in the Permian Basin, with leading positions in the Bone Spring, Avalon, Wolfcamp and Wolfberry plays. Chesapeake’s assets in the Permian Basin represent approximately 5% of the company’s total net proved reserves and current production. Chesapeake believes the Mississippi Lime joint venture, a Permian Basin transaction and various other minor asset sales could result in cash proceeds to Chesapeake of approximately $6-8 billion in 2012. The company is targeting completion of these transactions by the end of the 2012 third quarter.
Furthermore, Chesapeake anticipates monetization proceeds of approximately $2 billion during 2012 involving a portion of its midstream assets, service company assets and miscellaneous investments, bringing estimated total monetization cash proceeds in 2012 to $10-12 billion. These proceeds are substantially in excess of the difference between the company’s expected cash flow from operations and its planned capital expenditures and would allow the company to achieve its previously announced debt reduction goals while providing additional financial strength during this current period of low U.S. natural gas prices.
Finally, as part of its ongoing liability management strategy, Chesapeake today announced plans to issue $1 billion of Senior Notes due 2019 in a public offering, the proceeds of which will be used to refinance or partially refinance other shorter dated maturities later in the year and for general corporate purposes. Chesapeake affirms its goal to reduce its long-term debt to no more than $9.5 billion at December 31, 2012, and anticipates achieving investment grade metrics of net long-term debt per thousand cubic feet of natural gas equivalent proved reserves of less than $0.50 and net long-term debt to total capitalization of less than 35% by year-end 2012. Chesapeake plans to provide updated production and capital expenditure forecasts in conjunction with the release of its 2011 fourth quarter and full year financial and operational results on February 21, 2012.