According to Joe Carroll of Bloomberg, Chesapeake Energy Corporation (NYSE:CHK) could be getting an additional $1.8 billion more than estimated after the energy company announced they were going to sell a group of oil fields. The energy giant says they need to boost their cash reserves in a time of lower natural gas demand.
Chesapeake’s Permian Basin stake, which is roughly 1.5 million acres, has been valued at $6.82 billion based on recent deals within the area. This could be a sale target as the company warns they may be out of cash by next year as cash flow is falling.
The company just took out a $3 billion loan from Goldman Sachs Group, Inc. (NYSE:GS) and Jefferies Group, Inc. (NYSE:JEF). Chesapeake CEO McClendon says the loan is a bridge while the company completes its asset sales and raises more cash.
The company has been facing some hardships this year as natural gas fell below $2 at one point on high output and low demand. In addition, the little scandal involving the CEO’s personal stakes in the company owned oil wells sparked controversy which ended in the CEO’s strip of his chairman title.
The stock has not faired very well as it is down over 20% for the year so far. As oil prices come down as well, profit margins will continue to shrink until the company can find a way to weather the short fall in energy prices.
The latest news is that recent issues within the firm such as the CEO’s scandal have captured the attention of activist investors, most notably Carl Icahn. Icahn has been watching Chesapeake for weeks now and could be making a serious move at any time. It is unclear whether or not Chesapeake will be simply another investment or if the legendary investor will take root in the company and attempt to change the management and create more value for shareholders.
However, Icahn just won the bid for CVR Energy, Inc. (NYSE:CVI) and may not be looking for another energy holding right away. However, you never know because Chesapeake stock continues to fall which may imply a good entry point for the activist investor to initially get into the stock and wait for the activism for a later date.
The stock currently is down 5% to $14.74 in this early morning trading.
The bottom line is that the energy company is facing some short falls currently which raises a flag for activist investors who want to come in and turn the business around. Watch for any news of Icahn or any other investor moving into the stock.