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Last Update: 07-Aug-12 09:27 ET
Chesapeake Energy shares rise 5% following earnings and positive asset sales commentary
Chesapeake Energy (CHK $18.85 +1.15) reported second quarter earnings of $0.06 per share, $0.03 worse than the Capital IQ consensus of $0.09, while revenues rose 2.1% year/year to $3.39 billion versus the $2.42 billion consensus. Chesapeake's daily production for the 2012 second quarter averaged 3.808 bcfe, an increase of 25% from the average 3.049 bcfe produced per day in the 2011 second quarter and an increase of 4% from the average 3.658 bcfe produced per day in the 2012 first quarter. As a result of reduced drilling activity currently planned by the company for 2012 and 2013 in its dry natural gas plays, Chesapeake is projecting an approximate 12% decline in its natural gas productive capacity in 2013 compared to 2012 after adjusting for estimated production curtailments of approximately 60 bcf in 2012.
During the 2012 third quarter, Chesapeake expects to enter into agreements to sell three Permian Basin asset packages. A Purchase and Sale Agreement has been signed with affiliates of Houston-based EnerVest, Ltd. for the company's producing assets in the Midland Basin portion of the Permian Basin. Chesapeake anticipates net proceeds of approximately $7.0 billion for asset sales in the 2012 third quarter, including those discussed above, which if successfully completed, would bring the company's 2012 asset sales to approximately $11.7 billion. For the full year, the company has previously discussed a range of $11.5-14.0 billion in sales and management has updated its range to $13.0-14.0 billion. Assuming completion of its planned asset sales in the 2012 second half, Chesapeake plans to repay its $4.0 billion term loans and also achieve the 25% two-year debt reduction goal of the company's 25/25 Plan, which was first announced on January 6, 2011. CEO Aubrey McClendon said "As importantly, we continue to execute on our asset sale process. In the 2012 third quarter, we anticipate entering into approximately $7.0 billion of asset sales, including the sale of Permian Basin and midstream assets. These transactions will be in addition to the $4.7 billion of asset sales completed in the 2012 first half. In combination with further asset sales planned for the 2012 fourth quarter, we have increased our plans for asset sales this year to a range of $13.0 to $14.0 billion, which will enable us to accomplish our planned 25% long-term debt reduction to $9.5 billion by year-end 2012 in accordance with our 25/25 Plan we announced in January 2011."
During the 2012 third quarter, Chesapeake expects to enter into agreements to sell three Permian Basin asset packages. A Purchase and Sale Agreement has been signed with affiliates of Houston-based EnerVest, Ltd. for the company's producing assets in the Midland Basin portion of the Permian Basin. Chesapeake anticipates net proceeds of approximately $7.0 billion for asset sales in the 2012 third quarter, including those discussed above, which if successfully completed, would bring the company's 2012 asset sales to approximately $11.7 billion. For the full year, the company has previously discussed a range of $11.5-14.0 billion in sales and management has updated its range to $13.0-14.0 billion. Assuming completion of its planned asset sales in the 2012 second half, Chesapeake plans to repay its $4.0 billion term loans and also achieve the 25% two-year debt reduction goal of the company's 25/25 Plan, which was first announced on January 6, 2011. CEO Aubrey McClendon said "As importantly, we continue to execute on our asset sale process. In the 2012 third quarter, we anticipate entering into approximately $7.0 billion of asset sales, including the sale of Permian Basin and midstream assets. These transactions will be in addition to the $4.7 billion of asset sales completed in the 2012 first half. In combination with further asset sales planned for the 2012 fourth quarter, we have increased our plans for asset sales this year to a range of $13.0 to $14.0 billion, which will enable us to accomplish our planned 25% long-term debt reduction to $9.5 billion by year-end 2012 in accordance with our 25/25 Plan we announced in January 2011."
