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Chesapeake Energy (NYSE:CHK) announced after the close yesterday that they will offer 25 million common shares with the customary 15% over allotment. Net proceeds from the offering will be used to temporarily repay outstanding indebtedness under its revolving bank credit facility which it anticipates re-borrowing from time to time to fund its recently announced drilling and leasehold acquisition initiatives and for general corporate purposes.

Take a look at the capital flows (pro forma) since the end of last quarter:

  • April 2 - Sold 23 million shares of Common netting $1.011B
  • May 1 - Sold Tex-Okla-Kan assets for $623 million
  • May 1 - Sold Woodford Shale holdings for $1.5B
  • May 20 - Sold $1.38B of Contingent Convertible Senior Notes netting $1.173B
  • May 20 - Sold $800 million of Senior Notes netting $487 million after retiring notes.
  • July 1 - Sold 20% interest in the Haynesville shale to Plains Exploration (NYSE:PXP) for $1.65B
  • July 8 - Selling 28.75 shares Common to net $1.7B (estimated @$60/sh. net)

                            *****************************

Net Cash from Equity Sales $2.71B 
Net Cash from Debt Sales    $1.66B
Net Cash from Asset Sales  $3.77B 
                                              Total $8.14B

The $1.65B Haynesville sale to Plains Exploration also includes an additional $1.65B commitment for future cost sharing to develop the play. This transaction effectively raised the value of Chesapeake's remaining 80% interest in the Haynesville by $9.5B to $13.2B. At the end of Q1, CHK's market cap was about $24B. Including the latest offering shares, as of yesterday's close, the market cap would be $35B; up 42% (diluted) while net assets, thanks to the Haynesville alone are up 81%. The Woodford sale and Q2 net income will probably further enhance shareholder equity.

The only acquisitions announced during the period were for 18,000 acres in the Haynesville from Goodrich Petroleum and a third party for about $300 million (est.), and the Pier One building. So, going into Q3, any concerns about CHK's debt levels should be laid to rest; that is, unless Aubrey finds another Hunt Petroleum.

Sometimes the lights all shinin' on me......

Positions: None

 

Source: Chesapeake Energy: Truckin', Like the Do-Dah Man