Chesapeake Energy Corp. (CHK:US) reached a $3 billion loan agreement with a unit of Goldman Sachs Group Inc. (GS:US) and affiliates of Jefferies Group Inc. (JEF:US) to help ease a cash shortfall that threatens to curtail its development of oil and natural-gas wells.
Chesapeake will repay the short-term loan with part of the proceeds from as much as $11.5 billion in asset sales it plans for the remainder of the year, the company said in a statement late today.
Chesapeake, based in Oklahoma City, is trying to sell its oil fields in the Permian Basin in west Texas and New Mexico, and find a joint-venture partner to help fund drilling in a formation known as the Mississippi Lime in Oklahoma and Kansas by the end of 2012.
The company said it had received “strong interest” in the assets and joint venture and expects to complete the transactions in the third quarter.
“This short-term loan from Goldman and Jefferies provides us with significant additional financial flexibility as we execute our asset sales during the remainder of 2012,” Aubrey K. McClendon, chairman and chief executive officer, said in the statement.
The company also said in a filing earlier today that it may have to delay some of the asset sales planned for this year because the transactions could hurt its ability to comply with other loan agreements.
Unexpected $71 Million Loss
The company, which pumps more U.S. gas than any company except Exxon Mobil Corp. (XOM:US), posted an unexpected $71 million first-quarter loss on May 1, said it may run out of money next year and increased planned asset sales through the end of 2013 by 17 percent to $20.5 billion.
Chesapeake fell 14 percent (CHK:US) to $14.81 at the close in New York today, the lowest price since March 2009. Shares rose 4.9 percent to $15.53 at 7:47 p.m. New York time. Chesapeake has fallen 26 percent in the past four weeks amid concern that private loans McClendon obtained using personal stakes in company wells conflict with his professional duties.
The board said May 1 that it will strip McClendon of the chairman’s post and is conducting an internal review of the CEO’s personal financial transactions. The SEC opened an informal inquiry earlier this month, the company has said.
The $3 billion loan from Jefferies affiliates and Goldman Sachs Bank USA matures on Dec. 2, 2017 and has an initial variable annual interest rate of 8.5 percent.
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