Last January, Chesapeake Energy
One aspect of Chesapeake's two-year plan is the reduction of long-term debt. As of the third quarter, the company had reduced its long-term debt to $11.8 billion, down nearly a billion from $12.7 billion at the end of 2010. If the company successfully follows through on its 25% debt reduction plan, it should have $9.53 billion in long-term debt at the end of 2012. One of the main ways to achieve this goal has been to raise cash through asset sales.
The first major sale was for a 33% interest in Chesapeake's 800,000 net acres in the liquids-rich Niobrara shale to CNOOC
The second major asset sale was for 487,000 net acres in the Fayetteville shale and related midstream pipelines, sold to BHP Billiton
In November, Chesapeake announced an initial public offering of 20 million common units of the Chesapeake Granite Wash Trust
Early last month, Chesapeake announced the placement of $750 million in preferred shares of CHK Utica, which came out to $1.25 billion total when added to its earlier $500 million sale of perpetual preferred units. CHK Utica owns 700,000 net acres in the Utica shale and pays out an annual distribution of 7%, paid each quarter. The preferred shares were placed with a group of limit partners led by EIG Global Energy Partners.
Late last month, Chesapeake agreed to sell off its Marcellus shale midstream assets to Chesapeake Midstream Partners for $865 million. As part of the agreement, Chesapeake has committed to generating EBITDA of at least $100 million in 2012 and $150 million in 2013 on land that is served by the pipelines involved in the transaction.
Last but not least, the company announced earlier this month the closing of a joint venture with Total
Foolish bottom line
This is hardly an exhaustive list, but it demonstrates Chesapeake's desire to raise cash. If the company continues its present course of asset monetizations, it should mean that the company is not racking up debt to acquire acreage it cannot develop. I'll be watching to see whether Chesapeake continues to follow through on its 30/25 plan, which involves the all-important 30% production growth component. Many of the transactions involved drilling and completion carries, which should help the company increase production over the next several years at a low cost.
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Paul Chi is an analyst on the Fool's Alpha and Duke Street services. You can follow him on Twitter to stay up to date on his latest market commentary. Paul and Matt Argersinger co-manage the Street Fighter portfolio, where they look for cheap, unloved stocks with home run potential. Paul owns shares of Chesapeake Energy. Motley Fool newsletter services have recommended buying shares of Total and Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.