Don't look now, but CHK needs to raise $17.5 billion by the end of 2013. Over-extended while gas prices have been low for the last few years? Looks like they've been living off the savings account.
Chesapeake Energy Corp. 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 natural gas prices.
Oklahoma City-based 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 company said Wednesday 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 on Wednesday 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, CEO Aubrey McClendon said 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.
Shares of Chesapeake, the nation's second-largest natural gas producer, fell 59 cents, or 2.4 percent, to close at $24.03 on the New York Stock Exchange. The stock has lost 25 percent of its value in the past year.
For 2013, the company said total production will rise 15 percent, an increase from the November forecast of 10 percent growth.
Chesapeake 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, McClendon said. 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 to the website presentation.
Exxon Mobil Corp., based in Irving, Texas, is the largest U.S. gas producer, according to the Natural Gas Supply Association, a Washington, D.C.-based industry group whose members produce about one-third of the nation's gas.
Original Print Headline: Asset sales help Chesapeake cover shortfall
By JOE CARROLL Bloomberg News
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