From Barron's Stocks to Watch Today blog:
Chesapeake Energy’s $7 Billion Question
Chesapeake Energy (CHK) needs to sell $7 billion worth of assets this year to avoid breaching a covenant in one of its debt agreements, Moody’s analyst Peter Speer writes in a report analyzing the company’s challenges. The oil and gas explorer’s cash flow has declined along with the price of natural gas, Speer notes, and “Chesapeake risks exceeding the 4x Debt/EBITDA limitation in its credit facility in the second half of 2012.”Great, the claim to fame is "We know how to hold one heck of a yard sale".
To get over the hump, the company will have to sell assets quickly:
“Low natural gas prices have reduced Chesapeake Energy”s 2012 cash flow. This trend has left the company more dependent on asset sales to fund the large capital expenditures it will need to continue its transition towards higher liquids production. Chesapeake closed out its natural gas hedges in fall 2011 to fund 2011 capex, leaving it completely exposed to the collapse in natural gas prices in early 2012.”Chesapeake has proven adept at selling assets in the past, raising “$7 billion in 2010 and $10 billion in 2011 through asset-monetization transactions"...MORE
For some reason I find myself thinking of Carl Icahn's TWA light bulb bonds.