Chesapeake Enery Corporation (NYSE:CHK) earnings conference call took place Tuesday morning. Below, Chesapeake Enery Corporation (NYSE:CHK) is experiencing troubles and has large value investors as its largest ones being; Carl Icahn, Mason Hawkins of LongLeaf Partners, and Dan Loeb of Third Point. Additionally, Chesapeake being the second largest natural gas producer, has interesting comments about the natural gas industry.
The company would not comment on matters related to litigation.
The CEO, Aubrey Kerr McClendon, notes that natural gases are at their lowest ever, but still had great performance.
Expects to be largest gas producer in 2015.
Company will have first decline in natural gas production for the first time in 23 years. Expects other gas producers to keep reducing production until prices start to climb.
Expects asset sale of $7 billion, to bring $11 billion to date. GIP $2 billion sales already occurred. The $5 billion Midstream will be sold in Q3.
Are looking for another few asset sales to get to $13-14 billion. The company is looking for more asset sales in 2013. Expect to increase returns while increasing CapEx.
Asset base is a uniquely high quality and they think it was important to build it up (despite selling a lot of them now).
CEO notes large change since beginning of year, and thanks the new board and chairman (who replaced him).They have only had one board meeting with new members so far. McClendon did not comment on the specifics of the meetings so far.
The company wants to end the quarter with $9.5 billion in debt by end of 2012. Expect to end 2013 with no debt, but do not expect to need to rely on asset sales for liquidity needs during the year.
2013- asset sales will be mostly non core assets. FTS international is on the block, and the service company IPO is put off until 2013. The company will not get into more specifics, but emphasizes that they have many assets to sell. CHK states that from a liquidity perspective it does not need to sell anything.
Company places strong emphasis on liquidity, which is main concern of investors.
All talk of the company is as a going concern, no talk of of possible liquidation.
The company aims to use asset sales to try to focus more on oil, as natural gas prices are too low to make profits.
Chesapeake Enery Corporation (NYSE:CHK) is the largest producer in the UTICA shale. The company plans to drill for more wells in the shale field which should be profitable, as UTICA is the crown jewel of the company.
No set price for natural gas to get more into natural gas production, but industry-wide the number is around $5.
They have several bids on certain assets, but have not finalized certain sales yet. The company expects Chespeake Midland to be used to develop, they are not selling the entire asset. They could get private equity in there, there are many options, which the company needs to evaluate.
Private equity bringing $10s of billions of dollars, has been the largest change in the industry.