The failure of PDC to rope in a higher bid could have crucial ramifications for Chesapeake.The second largest US natgas producer is also looking for a partnerfor its Utica assets. Chesapeake Energy Corporation (NYSE:CHK) is stressed from the widening gap between its cash inflow and expenditures. It recently sold off 46 percent of its stake in its affiliate, Chesapeake Midstream Partners, and has been selling off several other assets as well. The company needs to close an overall budget gap of an estimated $22 billion. McClendon, CEO of Chesapeake is looking for a partner to lease its 1.3 million acre holdings in Utica for next year. The deal should raise at least $4.25 billion to make up for funding gaps.
Bloomberg reports that Neal Dingmann, an analyst at SunTrust Robinson Humphrey Inc, thinks that it is unlikely that Chesapeake will get anything close to $15,000/ acre for its holdings in the Ohio region. Last year, France’s Total S.A (EPA:FP) (NYSE:TOT) spent $15,000 an acre for share in Chesapeake’s Utica fields. Chesapeake Energy Corporation (NYSE:CHK) staked 542,000 Utica acres for $2.03 billion on Dec. 30 to Total.
Mark Hanson, analyst at Morningstar Investment Services in Chicago, is also not very excited about how big Utica Shale is going to be.
“The numbers are going the wrong way,” remarked Hanson,“This indicates it’s still too early to say the Utica is the next big thing.”