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What: Shares of embattled oil & gas company Chesapeake Energy (NYSE: CHK ) rose 10% today after saying it would slow down spending.
So what: Aubrey McClendon is finally stopping the land grab at Chesapeake, and says he will sell $14 billion in assets this year and up to $5 billion more next year. The company also said it would cut its capital spending budget by $6 billion next year, after spending $13 billion this year. The company has a $10 billion funding gap this year, and investors have been pressuring the company to sell assets and reduce spending.
In the second quarter, the company’s net income reached $972 million, or $1.29 per share, and adjusted EPS of $0.06 topped estimates of $0.02.
Now what: The company still plans to spend more money this year, so the changes aren’t taking place overnight. I think this is an incremental positive for the company, but there are still major concerns. McClendon is still at the helm after his conflicts of interest were unearthed. Chesapeake looks like a decent value if asset sales are completed, but I’m worried about the funding gap. I would take a cautious approach, even after the promise to cut spending today.
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