HOUSTON Chesapeake Energy Corp (CHK.N) 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 content.
"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 assets.
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 (XOM.N) for $590 million.
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.
(Editing by David Gregorio and Andre Grenon)