But with news from Gerson Leason Group’s Michael Lynch that Chesapeake Energy is planning to sell $1 billion in assets in the near future, and further news that Chesapeake is expected to sell another $1.5 billion in 2010, I couldn’t help but mention it.
Bear in mind that Chesapeake is not selling these assets because the company wishes to further pad its bank statement. Rather, it is because portions of their more than $12 billion in debt financing are coming due soon, and with natural gas prices lagging, a stock price still off more than 50% from the highs of last summer, and the CEO embroiled in lawsuits … well, they need the money.
And, even more importantly, as Lynch points out:
the worldwide financial collapse which has impacted all nations coupled with a self-inflicted shale gas glut in the U.S. has seriously jeopardized the entire natural gas industry. Close observers think the market weakness will extend into 2010 and based on what is known about the planned LNG worldwide expansions, could last a decade [emphasis added]. That is why it is imperative for the shale gas drillers to align their budgets with their cash flow and prepare for inevitable bond maturities.In other words, despite the optimistic statements from Mr. McClendon, it will get better before it gets worse. And, considering the Sonix rank at the bottom of the league in revenue, and that Chesapeake may very well be bought out by BP any month now, you’ve got to wonder, how much longer will he be able to continue subsidizing this team?