Chesapeake Raises $1.3B - More Marcellus, Perhaps?

Late Monday, Chesapeake Energy (CHK) announced the placement of $500 million of contingent convertible senior notes due 2038 and $800 million in senior notes due 2018. Chesapeake intends to use the net proceeds from the offerings to fund the redemption of its 7.75% Senior Notes due 2015, to repay outstanding indebtedness under its revolving credit facility, and for general corporate purposes.

Interestingly, according to the 12/31/07 10-K filed in February, the indebtedness under the 7.75% notes being redeemed is $300 million. leaving $1 billion for general corporate purposes and/or reduction of the outstanding credit facility. As of 12/31/07, Chesapeake owed $1.95 billion under the $3.5 billion revolver. Considering what are very favorable interest rate terms on the revolver, it would seem that that these funds are destined for investment. More Marcellus perhaps?

Full stories here and here.

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Comments

[CrossProfit_:]

Nice catch.

CrossProfit

2008 May 21 03:26 AM

[legmaker:]

Great job.

2008 May 21 07:42 AM

[Mmarrkk:]

Actually, I'm guessing this extra cash will go to funding their current drilling budget. This year's capital budget is almost $2 billion more than their estimated cash from operations, so they'll still need some more. now, the above sounds like fiscal sanity which has never been a trademark of Aubrey. Why not spend $8 billion when you are only making $6 billion? It is funding the future cash generation machine, BUTTTTTTT the money has to come from somewhere. Investors, bankers, etc. Wall Street hates it when they issue more stock, hate when they take on bigger debt instruments, hate it when they sell assets. But you gots to do sumthing!

2008 May 21 08:42 AM

[smgilb:]

The latter comment comes closer to the mark. The Marcellus acreage is HBP (held by production). In other words, you have to drill and produce to hold onto the "lease."

2008 May 21 01:34 PM