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Charles Kennedy

Charles Kennedy

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Beleaguered Chesapeake to Sell Off More Assets to Reduce $9B Debt

The second-largest producer of natural gas in the United States, Chesapeake Energy Corp., has announced plans to sell part of its Oklahoma shale acreage in order to prop up finances and reduce a massive debt load of around $9.4 billion.

Chesapeake announced yesterday that it would sell around 42,000 acres in the Stack field in Oklahoma, which currently produces around 3,800 barrels of oil equivalent per day.

The assets will go to Newfield Exploration Co. for an estimated price of $470 million.

Furthermore, due to low oil and gas prices, the company will seek to sell additional assets that will bring between $500 million and $1 billion in its coffers by the end of the year.

"We anticipate subsequent divestitures during the second and third quarters," Chief Executive Doug Lawler said in a statement. Related: U.S. Crude Imports Surge After Long Period Of Decline

Despite these difficulties, the company’s shares were up 12 percent at $6.31 in pre-market trading after the company reported a smaller quarterly loss and cut its production expense forecast for the year. They later traded at $5.97, up 5.7 percent.

The loss narrowed to $964 million over the first three months of the year, down from $3.78 billion in the same period of last year. First quarter revenue also fell by 39 percent to $1.9 billion, whereas analysts’ expectations stood at $2.55 billion. Except for an $853 million impairment charge, the loss in the latest quarter was 10 cents per share, in line with analysts' average estimate. Related: This Oil Major Seeks To Drive Solar Innovation At Qatar 2022

On Thursday, Chesapeake Energy lowered its forecast for 2016 production costs to $3.40-$3.60 per barrel of oil equivalent from $3.60-$3.80 per boe.

The company dismissed speculation that it was seeking bankruptcy.

"We continue to look at all of our options, including the use of additional secured debt, private transactions with bondholders and other types of exchange offers and open market purchases," said CFO Nick Dell'Osso. To this view, three months ago the company hired a legal counsel to look at all available alternatives in order to strengthen its balance sheet.

By Charles Kennedy of Oilprice.com

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