Chesapeake Energy may delay asset sales after posting $2 billion loss
BY JOE CARROLL Bloomberg News
Saturday, November 03, 2012
11/03/12 at 4:59 AM
Chesapeake Energy Corp., which wrote down $2 billion in natural gas reserves Thursday, said Friday that some asset sales may be delayed as it seeks new buyers.
Shares of the Oklahoma City-based energy producer plunged nearly 8 percent, finishing the week at $18.49.
Sales of gas fields and other assets that had been scheduled to occur this year won't happen until 2013, Chief Financial Officer Nick Dell'Osso said on an earnings conference call Friday. Among the delayed items is Chesapeake's 2 million acres in the Mississippi Lime, an Oklahoma and Kansas shale formation that holds crude oil and natural gas.
Chesapeake is no longer courting Asian investors for a joint venture in the Mississippi Lime, partly because of concerns about rising political opposition to foreign investment in domestic energy resources, CEO Aubrey McClendon said on the call. McClendon said he's now in discussions with oil industry players about buying some or all of the company's drilling rights.
"We have continued reservations about the company's liquidity," James Sullivan, an analyst at Alembic Global Advisors in New York, said in a note to clients. Asset sales are proceeding slowly and those that have been completed "fail to impress."
Chesapeake is seeking to sell as much as $19 billion in assets by the end of 2013 to plug a funding shortfall aggravated by the plunge in natural gas prices. A 29 percent slide in fuel prices during the third quarter compared with a year earlier wiped out the equivalent of 4.9 trillion cubic feet of Chesapeake's reserves. That's enough to supply every household in the U.S. for more than a year.
Energy explorers from Australia's BHP Billiton Ltd. and Canada's Encana Corp. began writing down the value of North American gas properties earlier this year as the price slump worsened and many fields became unprofitable to drill.
Concern about Asian buyers comes after the Canadian government last month rejected a bid by Malaysian oil company Petroliam Nasional Bhd. to buy Progress Energy Resources Corp.
On Thursday, Chesapeake reported a third-quarter net loss of $2.01 billion, or $3.19 a share, compared with profit of $922 million, or $1.23, a year earlier.
The net loss was the company's biggest since the first three months of 2009, when Chesapeake wrote down the value of some reserves in response to the worldwide financial crisis and reduced energy demand.
McClendon was removed from the chairman's role in June and more than half the board was replaced at the insistence of Chesapeake's largest investors, Southeastern Asset Management Inc. and Carl Icahn.
The board has been conducting an internal investigation for more than six months of McClendon's borrowings from some of the company's biggest financiers. Chesapeake hasn't said when the board will finish the inquiry. Probes also are under way at the Internal Revenue Service and the U.S. Securities and Exchange Commission.
Original Print Headline: Chesapeake may put off asset sales after loss