* $1.25 billion preferred shares sold
* $745 million raised in production deal
* Exxon buys Oklahoma acreage for $590 million
By Anna Driver
HOUSTON, April 9 Chesapeake Energy Corp
said on Monday it has struck three deals that will raise a total
of $2.6 billion, a cash infusion needed by the U.S. oil and gas
company as it faces a funding shortfall this year.
Chesapeake and other energy companies with big exposure to
decade-low natural gas prices are putting more capital toward
drilling for oil and pricier natural gas with a high liquids
"It's pretty clear that Chesapeake needs to raise a
significant amount of cash this year," said Scott Hanold, an oil
and gas analyst at RBC Capital Markets.
To help fund its drilling and close a financial gap that
some analysts see as up to $6 billion, Chesapeake said it will
close $10 billion to $12 billion in deals on its oil and gas
Chesapeake struck a $745 million natural gas production deal
with an affiliate of Morgan Stanley. In that deal, called a
volumetric production payment (VPP), Chesapeake receives cash up
front for future oil and gas production in a 10-year agreement
linked to some of the company's reserves and assets in the
Granite Wash in Oklahoma.
In another transaction, Chesapeake sold $1.25 billion of
preferred shares in a subsidiary called CHK Cleveland Tonkawa
LLC. The purchasers were led by an affiliate of the Blackstone
Group and included private equity firms TPG Capital and EIG
Global Energy Partners.
The Oklahoma City, Oklahoma company will sell 58,4000 acres
in Oklahoma to a subsidiary of Exxon Mobil Corp for $590
Chesapeake, which has a bloated share count and a heavy debt
load, has relied on VPPs and preferred share deals to raise
funds. However, some analysts see those types of transactions as
debt because they involve future obligations.
Given the size of their cash flow, they clearly have to get
creative," Hanold added.
Chesapeake shares rose to $21.80 in post-close trading, up
from a New York Stock Exchange close of $21.47.