Chesapeake Cash Flow Initiatives Revealed

Chesapeake Energy Corporation (NYSE:CHK) seems to have found a solution to its cash flow problems, revealing plans that could raise up to $12 billion in much-needed breathing room in 2012.

Over the next two months, Chesapeake could obtain almost $2 billion over the next two months from two separate deals that include a volumetric production payment on its Texas Panhandle Granite Wash assets, and another financial transaction from a subsidiary that holds some of its assets in Oklahoma.

The company also expects to garner capital receipts from the divestiture of various holdings and is pursuing joint venture transactions in its Mississippi Lime and Permian Basin plays where it owns 1.8 million and 1.5 million net acres of leasehold, respectively. If the offer is right, Chesapeake may sell off its Permian Basin assets.

Chesapeake believes the Mississippi Lime joint venture, a Permian Basin transaction, and various other minor asset sales could rise $6-8 billion in 2012. The company also expects to bring in about $2 billion from midstream assets, service company assets and miscellaneous assets, which could bring estimated total monetization cash proceeds in 2012 to $10-12 billion.

That total is well in excess of the oil and gas giant’s capex, thus providing room for the company room to retire debt even though natural gas prices are low. The company also plans to issue $1 billion of 2019 Senior Notes for restructuring debt and corporate purposes — measures that should provide additional liquidity going into 2013. Chesapeake is confident that higher liquids production will enable it to match operational cash flow to drilling and capital expenditure in 2014.

Here’s how shares of Chesapeake reacted to the news:

Chesapeake Energy Corporation (NYSE:CHK): CHK shares recently traded at $22.65, up $0.52, or 2.35%. They have traded in a 52-week range of $20.41 to $35.95. Volume today was 25,895,547 shares versus a 3-month average volume of 14,524,600 shares. The company’s trailing P/E is 11.41, while trailing earnings are $1.99 per share.

To contact the reporter on this story: Alex Capel at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com