Chesapeake Energy Corp. (NYSE: CHK) on Wednesday announced that it has successfully negotiated higher prices for some of its premium assets. The oil and gas producer said that these deals involving lands and infrastructure will help raising $6.9 billion -which is approximately half of its net debt that company is looking to lower by the end of this year. Nonetheless, stock ended lower.
Chesapeake is paying a hefty price for problems created by the company itself. The company not only overspent in the past by accumulating massive debts for spending on infrastructure and projects but it also got itself embroiled in corporate governance issues.Â As a result, the company is required to do lot more these days to win back the trust of investors. Even though sales of assets will bring billions of dollars, Wall Street was unconvinced. â€śItâ€™s helped them climb up the wall in this hole theyâ€™ve dug for themselves, but they are not there yet,â€ť commented Phil Weiss, an analyst at Argus Research.
CHK said that sale of assets in Permian Basin will raise $3.3 billion, falling short of its own expectation of $4 to $6 billion. However, it is important to note that the company did not sell the entire acreage over there and that could be one of the reason why it received lower amount than expectations.
On the brighter side, Chesapeake was able to sell its package pipeline and processing assets at higher-than-expected price.Â While the company was expecting $2 billion from this deal, it was lucky to get $3 billion for those assets. Nevertheless, the deal comes with a limitation: the Company is obliged to increase its output through these facilities which will result in future costs.
Based in Oklahoma City, Chesapeake is trying to wipe off $14 billion of debts this year by selling off some of its premium assets.
The company had about 11 deals in its lists; and, if all these deals are closed then concerns over Chesapeakeâ€™s liquidity in 2012 will be considerably lower.â€”which augurs well for the company.Â So far, proceeds from asset sales have generated $11.6 billion in the current year.