According to a report, Chesapeake Energy Corporation (CHK) estimates generating nearly $13 billion in cash in 2012 through operating cash flow and future deals. The amount should suffice for its capital expenditure and help in reducing debt.
Chesapeake has been spending heavily, buying acreage in shale basins that contain crude oil or natural gas with high liquids content. This buying spree has raised concerns within various investor groups.
Till date, the company has built leasehold positions and established production in multiple liquids-rich plays on approximately 6.2 million net leasehold acres. Based on its success so far, Chesapeake expects to increase its liquids production through drilling activities to approximately 150,000 barrels per day in 2012, 200,000 barrels per day in 2013 and 250,000 barrels per day in 2015.
The initial public offering of Chesapeake’s oilfield services business and the sale of its stakes in Frac Tech Services Inc and Chaparral Energy are expected to bring home $3 billion. Other business dealings are likely to draw about $3 billion and the operating cash flow is estimated at $6 billion.
Chesapeake’s initiative of deploying more funds toward liquids has helped it to grow rapidly. In our opinion, Chesapeake is one of the most active players in the industry that manages its asset portfolio through a combination of acquisitions and disposals.
Recently, the company revealed plans to sell a substantial portion of its land holdings in Ohio's Utica Shale for $3.4 billion in two separate deals. The first among these is a $2.14 billion deal with an undisclosed international partner to sell a 25% stake in 650,000 acres of Utica Shale that it holds with EnerVest Ltd.
Under the other transaction, Chesapeake will sell $500 million of its perpetual preferred shares in the newly formed subsidiary, CHK Utica, to EIG Global Energy Partners of Washington, D.C.
Oklahoma-based Chesapeake is an independent energy company engaged in the acquisition, development, and production of onshore U.S. natural gas resources. The company has grown rapidly and now ranks the second-largest natural gas producer in the country after ExxonMobil Corp. (XOM).
Chesapeake holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the stock.
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