Yesterday in New Orleans Chesapeake Energy presented its 2014 operations outlook at the Howard Weil Energy Conference. The company presented a projected 2014 capital spending budget of $5.4 billion down from $6.7 billion in 2013. Of this amount nationally, the company will spend only 20% of its total budget in its U.S. dry gas operations. It further announced it will spend less than 5% of its total operating budget, under $275 million, on the Pennsylvania Marcellus. The company estimates it will have just 6 to 7 rigs operating in Pennsylvania this year as it looks at plays closer to its Oklahoma home. Mark Holder, CIO and founder of Oklahoma based Stone Fox Capital Associates commented on Chesapeake Energy’s new focus in the Louisiana Haynesville Shale stating, “Combined with sufficient pipeline and takeaway capacity already in place, the shale might finally have some advantages over the more prolific Marcellus shale.” For Chesapeake Energy, challenged with stubbornly high debt levels, it continues its year over year trend in retreating from the Pennsylvania shale formation.
Despite the selling off more than $15 billion of company assets since 2012, its senior debt and term loans remained at an estimated $12.9 billion, a $720 million increase over its 2013 debt loads of roughly $12.2 billion. Cash on hand is estimated at less than $850 million. Chesapeake has sold off drilling land leasing rights, terminated employees; sold off its pipeline gathering and distribution system, compressor assets and written off several billion dollars in unproved shale gas reserves. It recently filed with the SEC to sell off yet another of its core assets, the company’s drilling and fracking oilfield services group. It carries further liabilities under its volumetric payment program wherein it must sell gas into the market today at prior agreed to pricing, more often than not under today’s prices for natural gas. Calls to the company’s investor services group inquiring about its debt obligations and upcoming asset sales were simply referred to published company information.
The Houston based private investment firm of Howard Weil was established in 1949 and today is a division of Scotia Bank. It holds its high profile oil and gas industry Energy Conference annually. The investment firm states on its web site, “Over the past 41 years, Howard Weil has hosted what has become one of the premier investor conferences in the energy industry. In March 2013, Howard Weil hosted its 41st Annual Energy Conference in New Orleans. During the four-day conference, CEOs and other top-level management representatives from 160 public energy companies presented to over 575 institutional investors from around the world. This year’s conference is in New Orleans.” According to the firm's spokesperson, Mary Alice Allen, manages its annual Energy Conference while company research associates, Peter Kissel and Blaise Angelico, cover the oil and gas exploration industry and follow developments at Chesapeake Energy.
Prospects for Chesapeake Energy given its present situation remain challenging. While the company is aggressively and quickly selling off its best assets to raise cash, it faces significant debt notes coming due in 2015 to 2018. Its now facing new production declines in its Sahara natural gas field in Oklahoma which is threatening $880 million in loans and notes from Barclays under a pair of agreements that repay the borrowings with future supplies of gas, crude oil and gas byproducts. In a little over a five years since 2007 when it entered the Pennsylvania Marcellus, its fortunes have turned downward and its continuing to retreat from the Pennsylvania shale formation along with other major oil and gas firms such as Shell Oil.
To learn more about Chesapeake Energy, go to: http://www.chk.com/Pages/default.aspx
To learn more about Howard Weil investment firm, go to: http://howardweil.com/default.aspx
To learn about aggressive shale gas depletion rates, go to: http://shalebubble.org/
Disclosure notice: The reporter is not a member of any environmental or anti-fracking group. He holds no U.S. securities in any oil and gas exploration company at this point in time. He is not being paid to write for and has no financial arrangements with any entity or person(s) listed in this article.