Chesapeake's Half-Billion Dollar Tab Spurs Credit Line Concerns
(Bloomberg) -- Chesapeake Energy Corp.’s ability to pay off a half-billion dollars in debt next month hinges on how much of a $1.76 billion nest egg and $4 billion credit line has already been burned by the second-largest U.S. natural gas producer.
On Monday, uncertainty on those resources helped fuel the steepest one-day drop in the stock’s history. Chesapeake now becomes the latest shale driller punished by gluts of gas and crude that have rendered companies increasingly desperate to conserve cash.
The company probably finished 2015 with about $1 billion still in hand, said Spencer Cutter, a Bloomberg Intelligence analyst. What’s unclear is just how much of the credit line remains in place to help cover $500 million in debt due on March 15. The concern among some investors is that the oil and gas producer may run out of cash to cover debts in a prolonged market downturn, said Tim Rezvan, an analyst at Sterne Agee & Leach Inc.
“The lifeblood of this company for the next four quarters at least will be their revolving credit facility,” Mark Hanson, an analyst at Morningstar Inc., said in a telephone interview on Monday. Investors will also be paying close attention to whether lenders reduce Chesapeake’s borrowing base during the bi-annual reassessment in April, he said.
Annual Loss
The company, scheduled to report earnings Feb. 24, declined to comment. The Oklahoma-based gas producer is expected to post a second consecutive annual loss this year as an oversupply of North American gas weighs on prices and erodes cash flows it needs to cover costs, according to analysts’ estimates. Burdened with a total debt load seven times larger than its market value, Chesapeake has been canceling drilling projects, cutting jobs and closing offices to hold onto every dollar it can.
Chesapeake’s exclusion of the $500 million in notes from a debt exchange that extended the payouts for some bonds signals that the company intends to pay up next month, Cutter and fellow BI analyst Julia Winters said in a note to clients on Tuesday.
Chesapeake pumps more U.S. gas than any driller other than Exxon Mobil Corp. It has $1.3 billion in debts maturing by the end of 2017, and analysts expect Chesapeake to have a cash shortfall of more than $1 billion over the next two years.
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Bankrupt Sri Lanka Takes Russia Oil
- FERC Approves Gas Pipeline Projects To Increase U.S. Exports
- A Guide to the Week's Oil and Gas Market Hits and Misses
- U.S. Announces First Ever Offshore Wind Sale On Pacific Coast
- Windfall Tax Branded a Backward Step
- Equinor Exits All Russia Joint Ventures
- Chevron Investors Go For Energy Transition In Near-Unanimous Vote
- Chevron Makes New Appointments In Leadership Structure
- DOI Invests $33MM Putting People to Work in Orphaned Well Program
- EU Leans Toward Delaying Pipeline Ban to Clinch Oil Deal
- Oil Inventories Down to Dangerously Low Point
- USA Fuelmakers Shifting Into Higher Gear
- ExxonMobil Selling Shale Assets for $750MM
- Shots Fired During Tanker Loading
- NPD Grants Slew of Drilling Permits
- World's Oil Growth Engine Is About to Slow
- Saudi Arabia Says It Has Done All It Can for the Oil Market
- FID For $13.2B Louisiana LNG Project
- BlackRock Told Texas It Will Still Invest In Oil And Gas
- Ruble Hits 5-Year High as Gas Buyers Bend to Putin Demand
- Russian Oil Producers Start Using Tankers the World Did Not Want
- ADNOC Announces 650MM Barrel Oil Find
- Finland Loses Main Gas Supply
- This Is Where the Oil Price Would Be Without the War
- Ban on Excessive Gasoline Prices Heading for Vote
- Oil and Gas Discovery Confirmed at Hamlet
- Oil Inventories Down to Dangerously Low Point
- Top Headlines: Be Prepared to Pay More at the Pump from June
- USA Fuelmakers Shifting Into Higher Gear
- Gas Prices Could Rocket in the Near Term