Chesapeake Struggling?

[Conan71]

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

Copyright 2012 World Publishing Co. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Read more from this Tulsa World article at http://www.tulsaworld.com/business/article.aspx?subjectid=49&articleid=20120223_49_E4_ULNSba268373

[swake]

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.

Not "the savings account", off of debt.

[Teatownclown]

They're raising crapital from furinurs!

Saw this coming two years ago....Aubrey's got some issues.....debt issues. Banks ran him off....

Price of Nat Gas has bottomed but don't look for any rapid appreciation.

Thin just ask Cramer who was their biggest cheerleader until last fall......

[Conan71]

They're raising crapital from furinurs!

Saw this coming two years ago....Aubrey's got some issues.....debt issues. Banks ran him off....

Price of Nat Gas has bottomed but don't look for any rapid appreciation.

Thin just ask Cramer who was their biggest cheerleader until last fall......

Didn't Aubrey lose all his stock a couple of years back or end up having to sell it?

Swake I was referring to selling off the assets as living off savings.  But yes, they've got a serious debt issue.  All one has to do is drive by the sprawling campus up near Nichols Hills to realize CHK is not a model of corporate efficiency.

[heironymouspasparagus]

This is one side effect of drilling fence row to fence row in this country.  Too much supply leads to lower prices.

Relates to the idea of 'energy independence' and the idea that is an item of national security.  We don't produce what we have already discovered.  There are some very good reasons for that.  One, we only have around 2 to 3% of the worlds reserves (And yet, we use 25% of the oil/gas produced), so it will be physically impossible for us to "drill our way out" of that reality.

Two - hey, let's use up all the other oil and gas before we use up all of ours.  We end up the last guy on the block with oil and gas.  (Not a very clever reason, but still used today.)

Three - as we see time and time again, if we get serious about drilling/production, the supply goes up and the price comes down which makes them stop drilling/producing again.  

[erfalf]

Every year they come out with those best places to work lists and Chesapeake is right up there, I laugh.

Interviewed for a job there early last year and declined a second interview. I was shocked at the average age of workers there. One was actually younger than I was (I was 28). The gentleman 3 or four levels up from what I would have been was about 35. Don't get me wrong, the pay and benefits are out of this world. But they have to be or no one would work there. People go for the money and experience and get out when they can. It is indicative of the whole culture their. They care little about the future. From the corporate office to the field. How many environmental infractions have they had over the last few years. They play fast and loose in every aspect of the company. It was only a matter of time before they started to feel the pain.

Side note, I hope OKC has a university that is willing to take over the campus because that is about all it will be good for if and when Chesapeake moves out.

[jacobi]

Side note, I hope OKC has a university that is willing to take over the campus because that is about all it will be good for if and when Chesapeake moves out.

I'm sure the state legislature will full fund it before they fund a damned thing in Tulsa.

[AquaMan]

Every year they come out with those best places to work lists and Chesapeake is right up there, I laugh.

Interviewed for a job there early last year and declined a second interview. I was shocked at the average age of workers there. One was actually younger than I was (I was 28). The gentleman 3 or four levels up from what I would have been was about 35. Don't get me wrong, the pay and benefits are out of this world. But they have to be or no one would work there. People go for the money and experience and get out when they can. It is indicative of the whole culture their. They care little about the future. From the corporate office to the field. How many environmental infractions have they had over the last few years. They play fast and loose in every aspect of the company. It was only a matter of time before they started to feel the pain.

What is the average age? I am just as sensitive to age discrimination towards youth as I am towards older. Whether the guy is 35 or 65 as long as he is capable to do the job what is the problem with that?

You would expect the average age to increase as you travel up the ladder though. If not you simply have a company without much wisdom. Maybe that is what you're getting at?

[nathanm]

This is one side effect of drilling fence row to fence row in this country.  Too much supply leads to lower prices.

Gee, ya think? I seem to remember someone here saying that wouldn't happen.

[heironymouspasparagus]

Gee, ya think? I seem to remember someone here saying that wouldn't happen.

Not me.  I have lived the oil industry life for all but about 6 years - as a kid and work career - have seen it going on for a long, long time.

[tulsa_fan]

What is the average age? I am just as sensitive to age discrimination towards youth as I am towards older. Whether the guy is 35 or 65 as long as he is capable to do the job what is the problem with that?

You would expect the average age to increase as you travel up the ladder though. If not you simply have a company without much wisdom. Maybe that is what you're getting at?

I think the inference is people don't stay there long term, which is why the middle and some of upper management is pretty young.  Fresh out of college guys will jump to work 70 hours a week for good pay and the promise of a long bright future for a company, a few years down the road they realize the carrot is much smaller and not worth the sacrifices and go elsewhere.  Most people in their late 30s, 40s typically have decided they don't want to sacrifice everything for their career, or if they do, they are already in the company that recognizes it and will reward it.

[heironymouspasparagus]

Would this be considered age discrimination?

A VP of Human Resources of a multi-billion dollar multi-national corporation (oil), talking to a group of about 350 sales, marketing, and engineering types about the direction/future of the the company makes the comment;

"the average age of our employees is 42...we've got to get that down...."

And in less than 2 months, the first of a series of layoffs occurs where about 80 people are affected.  Only one was under age 40.


Just curious...

[AquaMan]

I don't know whether its age discrimination but it sure is age ignorance. Did he say exactly why that age had to decrease? Health cost exposure?

Frankly, it seems incomprehensible that a top notch exec would say something like that publicly. Unless it Romney or something.

[sgrizzle]

Didn't I hear Devon was following suit as well.

Lot of great class A space in OKc might be available soon. Also, arena naming rights.

[Conan71]

I don't know whether its age discrimination but it sure is age ignorance. Did he say exactly why that age had to decrease? Health cost exposure?

Frankly, it seems incomprehensible that a top notch exec would say something like that publicly. Unless it Romney or something.

It's all Obamacare's fault!