Chesapeake Energy raises $2.6 billion in three deals
(Reuters; April 9) - Chesapeake Energy said April 9 it has struck three deals that will raise a total of $2.6 billion, a cash infusion needed by the oil and gas company as it faces a funding shortfall this year. Chesapeake and other energy companies exposed to decade-low natural gas prices are putting more capital toward drilling for oil and liquids-rich natural gas. "It's pretty clear that Chesapeake needs to raise a significant amount of cash this year," said Scott Hanold, an oil and gas analyst at RBC Capital Markets.
To help fund its drilling and close a financial gap that some analysts see as up to $6 billion, Chesapeake said it will close $10 billion to $12 billion in deals on its oil and gas assets. Chesapeake struck a $745 million natural gas production deal with an affiliate of Morgan Stanley. In that deal, called a volumetric production payment, Chesapeake receives cash upfront for future oil and gas production in a 10-year agreement linked to some of the company's reserves and assets in the Granite Wash in Oklahoma.
In another transaction, Chesapeake sold $1.25 billion of preferred shares in a subsidiary called CHK Cleveland Tonkawa. The purchasers were private-equity firms. And, in a third deal, the company will sell acreage in Oklahoma to a subsidiary of ExxonMobil for $590 million.