Credit market investors have restored a shred of hope in Chesapeake Energy Corporation (NYSE:CHK) after they shared positive remarks about the company. According to these investors, Chesapeake’s current inclination towards Assets sales will contain the $22 million cash shortfall.
Three months ago, Chesapeake Energy Corporation (NYSE:CHK) noted that it may fail to meet its debt obligations in the coming year. However, the speculation by market investors, coupled with progress in asset sales have snuffed out these fears.
Chesapeake’s current predicament was predominantly triggered by the ill-fated bet it made on natural gas prices, at least this is what Moody's Corporation (NYSE:MCO) Investors Service believes. According to the Moody’s Investors Service, the effects of the natural gas prices primarily leaned towards the Chesapeake’s finances, as its cash flow was greatly reduced.
As of the moment, progress is not as fast. The company’s bond yields dipped from 6.76 percent at the end of April, to come in at the current 6.48 percent. In addition to that, Moody’s may extend a credit downgrade in the event that Chesapeake’s divestures do not exceed $7 billion by the end of the year.
While this news restores some hope, Chesapeake Energy Corporation (NYSE:CHK) is still not out of the woods. “They still need to sell a lot of assets,” says Principal Global Investors’ senior high-bond analyst, Kristopher Keller. Principal Global Investors provides oversight to Chesapeake assets, valued at $260 billion, and owns bonds at the company. Kristopher however, noted that despite the uphill task, the expected divestures would be instrumental in snuffing out the near-term liquidity risk.
Interestingly, Chesapeake’s performance in the outgoing quarter has been exemplary. In as much as the quarter was characterized by board shakeups, conflict within the management, and a domineering negative theme, the company managed to post incredible quarterly profits, the highest in Chesapeake’s history. Apparently, the assets sales pushed net income to $972 million- an increase of 91 percent.
According to Moody’s analyst, Peter Speer, investors have drifted into a comfort zone following the positive progress with asset sales. “The fact that they’ve got bids in hand is certainly better than just saying they have the assets and are selling,” he noted.
In general, the company’s outlook has begun taking a positive turn. The assets sales have been instrumental in plugging the cash drain and giving the company the financial strength to plough through the challenges.
At the moment, Chesapeake’s projections for 2012 assets are placed at highs of up to $14 billion.