Chesapeake Energy earnings

Chesapeake Energy Asset Sales Will Plug The Drain & Cover Debt

Chesapeake Energy Asset Sales Will Plug The Drain & Cover Debt

Credit market investors have restored a shred of hope in Chesapeake Energy Corporation (NYSE:CHK) after they shared positive remarks about the company. According to these investors, Chesapeake’s current inclination towards Assets sales will contain the $22 million cash shortfall.

Three months ago, Chesapeake Energy Corporation (NYSE:CHK) noted that it may fail to meet its debt obligations in the coming year. However, the speculation by market investors, coupled with progress in asset sales have snuffed out these fears.

Chesapeake’s current predicament was predominantly triggered by the ill-fated bet it made on natural gas prices, at least this is what Moody’s Corporation (NYSE:MCO) Investors Service believes. According to the Moody’s Investors Service, the effects of the natural gas prices primarily leaned towards the Chesapeake’s finances, as its cash flow was greatly reduced.

As of the moment, progress is not as fast. The company’s bond yields dipped from 6.76 percent at the end of April, to come in at the current 6.48 percent. In addition to that, Moody’s may extend a credit downgrade in the event that Chesapeake’s divestures do not exceed $7 billion by the end of the year.

While this news restores some hope, Chesapeake Energy Corporation (NYSE:CHK) is still not out of the woods. “They still need to sell a lot of assets,” says Principal Global Investors’ senior high-bond analyst, Kristopher Keller. Principal Global Investors provides oversight to Chesapeake assets, valued at $260 billion, and owns bonds at the company. Kristopher however, noted that despite the uphill task, the expected divestures would be instrumental in snuffing out the near-term liquidity risk.

Interestingly, Chesapeake’s performance in the outgoing quarter has been exemplary. In as much as the quarter was characterized by board shakeups, conflict within the management, and a domineering negative theme, the company managed to post incredible quarterly profits, the highest in Chesapeake’s history. Apparently, the assets sales pushed net income to $972 million- an increase of 91 percent.

According to Moody’s analyst, Peter Speer, investors have drifted into a comfort zone following the positive progress with asset sales. “The fact that they’ve got bids in hand is certainly better than just saying they have the assets and are selling,” he noted.

In general, the company’s outlook has begun taking a positive turn. The assets sales have been instrumental in plugging the cash drain and giving the company the financial strength to plough through the challenges.

At the moment, Chesapeake’s projections for 2012 assets are placed at highs of up to $14 billion.

LEAVE A COMMENT


X
Saved Articles
X
TextTExtLInkTextTExtLInk

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Are you an intelligent investor?

ValueWalkPremium is a website and newsletter for smart investors like yourself. We focus on the latest hedge fund industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today for only a few dollars a day and get a 3 day no obligation trial with a targeted 20% discount coupon code.

Cancel anytime during trial and you are never charged.

Limited time offer: For first 50 subscribers

0