Chesapeake may delay asset sales, shares sink

Chesapeake may delay asset sales, shares sink

(Reuters) - Chesapeake Energy Corp may delay asset sales in order to preserve cash flow needed to comply with requirements of its corporate credit facility, the company said on Friday, pushing its stock down to its lowest level in more than three years.

Chesapeake, the second-largest U.S. natural gas producer, faces a funding gap that Fitch Ratings estimated at $10 billion this year. To fill the void and trim its debt, the company aims to raise as much as $14 billion through the sale of assets and other deals.

The company said that although asset sales would help its liquidity, selling properties currently producing oil and gas can reduce its cash flow and the value of collateral used to back its debt.

"As a result, we may delay one or more of our currently planned asset monetizations, or select other assets for monetization, in order to maintain our compliance," it said in its quarterly filing to U.S. Securities and Exchange Commission.

Michael Kehs, a spokesman for the company, said the statement in the company's filing did not indicate a change in its efforts to raise money.

"There is no plan to change the asset monetization plan," he said.

Despite a rebound in the past few weeks, U.S. natural gas prices remain near their lowest levels in a decade. Those low levels have squeezed cash flows for Chesapeake and other energy producers and raised concerns that companies may need to reduce their estimated value of their properties.

"If natural gas prices fall too low, then they may have to take impairment charges. I expect that's the case at some point this year," because of the slide in prices since the end of 2011, said Phil Weiss, an analyst at Argus Research.

Chesapeake has long been one of the industry's most active buyers and sellers of natural gas properties in the United States, but Wall Street analysts have begun to question whether it can keep striking enough deals to satisfy its cash needs.

The gap between cash coming in and cash going out shows "massive internal funding shortfalls," according to an April report by Standard & Poor's.

On Wednesday, Moody's Investors Service changed its outlook for Chesapeake's debt to negative from stable, citing "an even-larger capital spending funding gap for 2012," due both to lower energy prices and higher spending.

Between now and the end of 2013, Chesapeake expects as much as $23.1 billion in costs for outlays such as wells and property, according to the company and analysts.

Chesapeake's stock tumbled nearly 14 percent to close at $14.81 per share, its lowest level since March 2009, and bringing its losses so far this year to 34 percent.

(Reporting by Matt Daily, Jon Stempel, Michael Erman, Ernest Scheyder and Anna Driver; Editing by Jan Paschal)