Chesapeake Sales to Continue Through 2013 Amid Cash Crunch
February 23, 2012, 3:39 AM ESTBy Joe Carroll
(Updates with closing share price in sixth paragraph.)
Feb. 22 (Bloomberg) -- Chesapeake Energy Corp., the second-largest U.S. natural-gas producer, plans to sell $4 billion to $5.5 billion in gas fields and other assets next year to help cover a cash shortfall stemming from plunging gas prices.
Chesapeake, which announced plans last week to sell as much as $12 billion in assets this year, needs to raise as much as $17.5 billion by the end of 2013 to avoid outspending its cash flow, the Oklahoma City-based company said today in a presentation on its website.
Stung by a glut of the heating fuel that drove prices to a 10-year low, Chesapeake last month pledged to cut gas-drilling expenditures to the lowest since 2005. As a result, the company today lowered its estimate for 2012 production growth to 9 percent from a target of 15 percent announced in November.
About 1 billion cubic feet of Chesapeake’s daily output will remain suspended at least through October, Chief Executive Officer Aubrey McClendon said today during a conference call with analysts and investors.
McClendon said the production curtailments the company enacted in the Haynesville and Barnett shale formations were a “sacrifice” that will benefit the rest of the gas industry.
The shares fell 2.4 percent to $24.03 at the close in New York. The stock has lost 25 percent of its value in the past year.
Bakken Disappointment
For 2013, the company said total production will rise 15 percent, an increase from the November forecast of 10 percent growth.
McClendon has been moving drilling rigs from fields that contain mostly gas to formations soaked with more crude oil and so-called gas liquids such as propane, which command higher prices than dry gas. The company estimates its oil and liquids production will reach 203,000 barrels to 214,000 barrels a day next year, and 250,000 barrels a day in 2015.
Exploratory drilling in the Williston Basin in the northern U.S. Great Plains, an area that includes the Bakken shale, so far have been disappointing for Chesapeake, McClendon said during the call. The company is shifting rigs to the western edge of its acreage to continue the search, he said.
McClendon said the slump in gas prices is “very unlikely” to persist through 2014 because of the “rapidly changing” relationship of supply and demand. Chesapeake’s cash flow will break even with spending by 2014, according the the presentation posted on its website.
Exxon Mobil Corp., based in Irving, Texas, is the largest U.S. gas producer, according to the Natural Gas Supply Association, a Washington-based industry group whose members produce about one-third of the nation’s gas.
--Editors: Jessica Resnick-Ault, Jasmina Kelemen
To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net
