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Fitch Reviews Oil & Gas Operations and Reserves

Paul Ausick — Fri, 11 May 2012 17:34:44 +0000

Fitch Ratings is out with a statistical review of operational metrics at a number of oil & gas companies. The review notes a handful of emerging trends:

Finding, development, and acquisition (FD&A) costs are rising.
Reserves are growing.
Proved, developed reserves are shrinking.
Reserve additions are not well matched to production.
Liquids are in every E&P company’s sights.

To even out the changes a bit, Fitch computed a three-year average as well as a year-over-year average change.

FD&A costs for the entire group of companies fell by an average of -14% over three years, but the variation was large. The three-year average cost of a barrel in 2008 was $20.76, falling to $16.46 in 2011. Exxon Mobil Corp. (NYSE: XOM) posted an increase of 45% in FD&A costs over three years, while Chevron Corp. (NYSE: CVX) lowered its costs by -41% and ConocoPhillips lowered its costs by -36%. Occidental Petroleum Corp. (NYSE: OXY) showed a 1% increase in FD&A costs over the three years and Hess Corp. (NYSE: HES) paid 60% more per barrel in FD&A costs. FD&A costs for SandRidge Energy Corp. (NYSE: SD) rose 42%, while the largest drop in costs came at Range Resources Inc. (NYSE: RRC), at -65%.

Total proved reserves posted median gains of 4.8% year-over-year and 24% since 2008. Some of the largest reserves gains came from additions of natural gas, which drove up the reserve equivalent barrels count, but weighed on valuations due to the low prices for natural gas. Among the bigger companies, Exxon increased its reserves by 14.1% over the three-year span, while Chevron’s reserves grew by just 0.4% and Conoco’s fell by -18%.

Proved, developed reserves declined for all the companies in the sample by -3.5% over the three-year period. Fitch defined proved, developed reserves as “proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods, or through relatively minor expenditures.” Essentially that means that the companies are increasing production from existing wells and driving down the amount that’s left to get out of a producing well. As a percentage of total reserves, proved, developed reserves rose the most at Marathon Oil Corp. (NYSE: MRO), a total of 8% in the three-year period. Proved, developed reserves fell the most at Plains Exploration & Production Co. (NYSE: PXP), a total of -16.4%.

The mismatch between production and reserves replacement is described as “lumpy” by Fitch. The problem is mainly one of timing. A project with a long startup cycle, like Chevron’s liquefied natural gas project offshore of Australia, delays reserves booking well past the time the company spent billions of dollars to develop the project. This effect will become a bigger issue as new projects are developed in ultra-deepwater and other difficult environments by smaller companies.

Finally, the push to develop liquids production has been well-documented over the past couple of years. With natural gas prices near historic lows, liquids development is critically important to companies that once focussed almost exclusively on dry natural gas. The largest three-year average gain in liquids reserves was 40% at SandRidge, followed by 12% gains at Pioneer Natural Resources Co. (NYSE: PXD) and Newfield Exploration Co. (NYSE: NFX). Chesapeake Energy Corp. (NYSE: CHK) grew its liquids reserves by 11% over the three years.

Fitch notes that what it calls ‘efficiency’ — which is essentially the sum of all the factors it looked at in this operational review — “helps determine the relative credit quality and competitiveness of a firm when indexed against its peers … [B]eing a low-cost, efficient producer remains a key credit protection in the event of lower oil prices.”

The full report from FitchRatings is available here.

Paul Ausick

Filed under: Oil & Gas, Research Tagged: CHK, COP, CVX, HES, MRO, NFX, OXY, PXD, PXP, RRC, SD, XOM

New Crude Oil Pipeline System to be Built in Gulf of Mexico (EPD, GEL, APC, APA, XOM, E, PBR, PXP, BP, MRO, RDS-A, CVX, COP)

Paul Ausick — Wed, 04 Jan 2012 14:57:26 +0000

Two pipeline companies have agreed to a 50-50 joint venture to build a new 149-mile offshore gathering system in the Gulf of Mexico. Enterprise Products Partners L.P. (NYSE: EPD) and Genesis Energy LP (NYSE: GEL) will build the system and Enterprise will be the operator.

The new gathering system will serve the Keathley Canyon area and serve producers Anadarko Petroleum Co. (NYSE: APC), Apache Corp. (NYSE: APA), Exxon Mobil Corp. (NYSE: XOM), Eni SpA (NYSE: E), Petroleo Brasileiro (NYSE: PBR), and Plains Exploration & Production Co. (NYSE: PXP). Keathley Canyon was the site of the first major oil discovery in the US Gulf once drilling was reopened following the Macondo well explosion in April 2010 that killed 11 workers on a rig operated by BP plc (NYSE: BP). Exxon, which made the discovery, has estimated the resource at 700 million barrels.

The joint venture, called the Southeast Keathley Canyon Pipeline Co. LLC (SEKCO), plans to build an 18-inch pipeline to transport 115,000 barrels/day of crude to a floating production platform and connect to Enterprise’s Poseidon pipeline system to move the oil onshore. The southeast portion of Keathley Canyon is estimated to hold about 300 million barrels of reserves.

In related transactions, Genesis is acquiring a 28% stake in the Poseidon pipeline system from Marathon Oil Corp. (NYSE: MRO), as well as a 29% stake in the Odyssey pipeline system which is majority owned and operated by Royal Dutch Shell plc (NYSE: RDS-A) and a 23% stake in the Eugene Island pipeline system owned by a group including Exxon, Shell, Chevron Corp. (NYSE: CVX), and ConocoPhillips (NYSE: COP). Genesis is paying about $206 million for these three acquisitions, which includes about $26 million for the value of the crude already in the pipelines. The company used its revolving credit facility to finance the purchases.

The SEKCO pipeline system is expected to be in service by mid-2014.

Paul Ausick

Filed under: Oil & Gas Tagged: APA, APC, BP, COP, CVX, E, EPD, GEL, MRO, PBR, PXP, RDS-A, XOM

Chesapeake Sells Utica Shale Stake to Total (CHK, TOT, BP, PXP, SD, CRZO)

Paul Ausick — Tue, 03 Jan 2012 14:34:29 +0000

In yet another of the deals that shakes up the landscape of US shale gas production, Chesapeake Energy Corp. (NYSE: CHK) has formed a joint venture with Total SA (NYSE: TOT) and privately held Enervest in which the French oil giant will pay $2.32 billion for a 25% stake in 619,000 net acres in production from the Utica shale gas play in eastern Ohio. Chesapeake has already done a deal with Total in the Barnett shale play in Texas, as well as deals with BP plc (NYSE: BP) and Plains Exploration & Production Co. (NYSE: PXP) in Arkansas, and Statoil ASA (NYSE: STO) in the Marcellus shale play in Pennsylvania.

Chesapeake isn’t alone in doing these joint venture deals. SandRidge Energy Inc. (NYSE: SD) and Carrizo Oil & Gas Inc. (NASDAQ: CRZO) have also recently sold stakes in shale gas plays.

In the latest deal, Total paid Chesapeake about $610 million in cash and will spend an additional $1.42 billion on drilling and completion costs anticipated through the end of 2014.

In the press announcement, Chesapeake’s CEO enumerated the company’s joint ventures and their value:

This Utica transaction is our seventh significant JV and in these seven JVs, Chesapeake has sold approximately 1.5 million net acres for total leasehold consideration of $14.8 billion while retaining 3.6 million net acres as of the JV date with an indicated value by the JV partners of $45.7 billion.

The Utica shale play, like the Eagle Ford play in south Texas, is liquids rich and far more valuable due to the high price companies can get for both the natural gas liquids and the oil that can be extracted using hydraulic fracturing (fracking).

But production companies may have hit a snag in Ohio. On Saturday, a 4.0-magnitude earthquake hit the Youngstown, Ohio, area and led to the state’s closure of all 177 waste water injection wells. There is some concern that the practice of injecting the recovered fracking fluids back into the ground is causing some of the quakes that have occurred in Ohio, Pennsylvania, Arkansas, and Texas.

The injection wells in Ohio are about 9,000 feet below the surface, making any risk to drinking water extremely small. A recent US EPA report on groundwater contamination from fracking in Pavillion, Wyoming, studing wells less than 300 feet below the surface.

Chesapeake’s latest joint venture, combined with the sale of its pipeline assets in the Marcellus shale announced last week, puts about $3.2 billion onto the company’s books. Chesapeake intends to garner about $7 billion in 2012 by selling assets, holding an IPO for its own oil field services company, and creating joint ventures. The company also plans to increase production by 30%. The goal is to reduce its outstanding debt by 25%.

Chesapeak’s shares are up nearly 3.5% in pre-market trading this morning, at $23.05 in a 52-week range of $22.00-$35.95.

Paul Ausick

Filed under: Oil & Gas Tagged: BP, CHK, CRZO, PXP, SD, TOT

Chesapeake Leaves the Fayetteville Play (CHK, BHP, BP, PXP, BCS, XOM, HK, POT)

Administrator — Tue, 22 Feb 2011 16:06:01 +0000

It’s hardly news any more when Chesapeake Energy Corp. (NYSE: CHK) sells off more assets. This time is a little different, though, because of the buyer. BHP Billiton plc (NYSE: BHP) has agreed to pay around $4.75 billion in cash for all of Chesapeake’s assets in the Fayetteville shale gas play. The deal includes all 487,000 leased acres in the play and 420 miles of pipelines. Chesapeake’s production in the Fayetteville play is about 415 million cubic feet of gas per day.

Chesapeake had already sold a 25% stake in its Fayetteville play to BP for $1.9 billion. The company had also sold all its assets in the Arkoma basin and 20% of its assets in the Haynesville shale play to Plains Exploration & Production Co. (NYSE: PXP) for $1.65 billion. Chesapeake has also struck a five-year volumetric production agreement with Barclays Bank PLC (NYSE: BCS) that pulled in another $1.15 billion. Those deals siphoned off about 1 trillion cubic feet of production. China’s Cnooc Ltd. (NYSE: CEO) bought a 33% stake in Chesapeake’s Eagle Ford shale play for $1.08 billion late last year.

And Chesapeake’s not alone. Exxon Mobil Corp. (NYSE: XOM) paid $650 million to Petrohawk Energy Corp. (NYSE: HK) for Petrohawk’s Fayetteville assets.

With natural gas prices once again below $4/thousand cubic feet, the wonder is that anyone would acquire more natural gas reserves. BHP bought into the Fayetteville because the asset adds more than 10 trillion cubic feet of hydrocarbons to the company’s reserves base. Chesapeake was willing to sell because it would rather drill in either the Haynesville or Eagle Ford plays, where there is a larger percentage of higher-profit natural gas liquids.

It could be argued that BHP is looking for ways to spend its cash hoard. After failing to get control of Potash Corp. of Saskatchewan (NYSE: POT) for a deal valued at nearly $39 billion, BHP shareholders have been clamoring for increased payouts. The company has raised its stock buyback program to a total of $10 billion, but would like to do something with the cash that beefs up the company’s long-term prospects.

Chesapeake’s shares have set a new 52-week high this morning, giving the shares a range of $19.62-$32.61. That’s great for shareholders, but remember that less than three years ago Chesapeake shares topped out at around $67. Even if the company is able to chop its debt, which is still around $11 billion, the price it will have to pay to do so could put that $67 share price in the rear-view mirror for good.

Paul Ausick

Filed under: ADR, Commodities, Mergers and Buy Outs, Oil & Gas Tagged: BCS, BHP, BP, CHK, HK, POT, PXP, XOM

The Haynesville Shale: Major Opportunity & Risk (CHK, ECA, HK, EOG, XOM, DVN, XCO, FST, PXP, EP, COG, SM, GDP, CRK, CLR, DCP, KMP, ETP)

Administrator — Tue, 23 Nov 2010 13:53:47 +0000

US shale gas deposits were known to have existed for decades. The problem was how to turn them into flowing wells. The natural gas was tightly compressed into small pockets in virtually impermeable rock. In the late 1990s, a small company called Mitchell Energy figured out how to fracture the rock and get the gas flowing. That happened in the Dallas-Fort Worth area in a gas deposit known as the Barnett shale.

Another deposit off to the northeast was known as the Haynesville shale, most of which is located in northwestern Louisiana with related deposits into southwestern Arkansas and east Texas. As exploration developed in the Haynesville shale, the estimated size of the resource was calculated at more than 250 trillion cubic feet of natural gas. That’s more than enough to supply the entire US consumption of natural gas for 10 years at current rates. The Haynesville shale is believed to be the largest natural gas reservoir in North America.

Drilling began in the Haynesville shale in about 2008 and the area is now dotted with wells drilled by more than two dozen companies. The following list names the 15 largest publicly traded companies by their net acreage holdings in the Haynesville shale as reported on their 2009 annual reports. Net acreage is equal to wholly-owned leases plus participation shares in jointly held leases.

Chesapeake Energy Corp. (NYSE: CHK) – 514,425 net acres
EnCana Corp. (NYSE: ECA) – 429,000 net acres
EOG Resources, Inc. (NYSE: EOG) – approximately 370,000 net acres
Petrohawk Energy Corp. (NYSE: HK) – 360,000 net acres
Forest Oil Corp. (NYSE: FST) – 250,098 net acres
Exxon Mobil Corp. (NYSE: XOM) – 166,000 net acres
EXCO Resources Inc. (NYSE: XCO) – 155,945 net acres
Plains Exploration & Production Co. (NYSE: PXP) – 111,000 net acres
Goodrich Petroleum Corp. (NYSE: GDP) – 84,859 net acres
Comstock Resources Inc. (NYSE: CRK) – 72,638 net acres
St. Mary Land & Exploration Co. (NYSE: SM) – approximately 41,000 acres
El Paso Corp. (NYSE: EP) – approximately 40,000 net acres
Continental Resources Inc. (NYSE: CLR) – 24,200 net acres
Cabot Oil & Gas Corp. (NYSE: COG) – 5,852 net acres

Plains also owns 20% of Chesapeake’s interest in the Haynesville shale. Exxon got its share of the play with its purchase last year of XTO Energy.

Three pipeline companies also have extensive operations in the Haynesville play. Kinder Morgan Energy Partners, L.P. (NYSE: KMP) owns a 50% share of a joint venture with PetroHawk, which owns and operates a pipeline and gathering system that will handle more than 800 million cubic feet/day by the end of 2010. Energy Transfer Partners L.P. (NYSE: ETP) is completing the Tiger Pipeline, a 175-mile, 42-inch interstate pipeline that will interconnect with other interstate pipelines to haul the gas to the east and northeast US. DCP Midstream Partners LP (NYSE: DPM) owns and operates some 4,660 miles of gathering and transport pipeline in the Haynesville play.

Oil field services companies also participate by providing the high pressure pumping systems and fluids that break up the shales and allow the gas to flow to the surface. Halliburton Co. (NYSE: HAL), Schlumberger Ltd. (NYSE: SLB), and Baker Hughes Inc. (NYSE: BHI) are among the players here.

The fracturing techniques and the fluids used to force the cracking have come under some scrutiny. The services companies have long held that their fluid formulas are proprietary, and they have refused to give up the exact formulas for the fluids. Some localities and environmental groups are trying to force the companies to release the formulas in order to determine if the chemicals are making their way into local drinking water supplies.

General Electric Co. (NYSE: GE) has recently introduced a new mobile fracking solution in what appears to be a giant opportunity in what the company called “energy efficient, fully transportable, cost effective and that it will enable onsite frac water recycling.”

Haynesville and other natural gas regions have been highlighted in many documentaries and many articles of late. Some are favorable, some are very critical. T. Boone Pickens and others are also touting natural gas as the bridge fuel that can get America off of foreign energy dependence. This is work in progress with an unfinished outcome. There are billions upon billions of dollars at stake.

Paul Ausick

Filed under: Commodities, Oil & Gas Tagged: CHK, CLR, COG, CRK, DCP, DVN, ECA, EOG, EP, ETP, FST, GDP, GE, HK, KMP, PXP, SM, XCO, XOM

Soros Fund Holdings

247wallst — Tue, 17 Nov 2009 15:52:08 +0000

Yesterday Soros Fund Management Filed a 13-F outlining the fund’s long portfolio as of September 30th, 2009. The total value of the holdings reported in the filing is $6,198,089. Twenty holdings represented roughly 50% of the value. Soros Fund Management is a hedge fund management company that invests primarily based on macroeconomic analysis. It should be noted that the fund’s equity portfolio likely contains significant short positions, which are not reported in 13-F filings. Some of the positions in the filing may be in place as hedges or part of a multi-part trade, rather than a directional bet. With that in mind, a glance at this firm’s major holdings provides clues to its macroeconomic outlook.

Total stakes in Petroleo Brasileo Brasileiro (NYSE: PBR) represent 9.23% of the value of the positions reported in the filing, with just over 13 million shares held. This is down from by 2.3 million from the fund’s last filing.

A stake in Hess Corp (NYSE: HES) represents 4.47% of the value of the protfolio reported in the filing. Soros Fund managament held 5,886,40 shares, up by 1700 from the fund’s last filing.

Potash Corp (NYSE: POT) represents 4.3% of the fund’s reported portfolio. The fund held 2,948,421 shares as of September 30th, up 971,386 since the fund’s last filing.

LSI Corporation (NYSE: LSI) represents 4.05% of the fund’s reported portfolio. The fund held 249,687,000 shares as of September 30th, up 600,000 since the fund’s last filing.

SPDR Gold Trust (NYSE: GLD) represents 3.91% of the fund’s reported portfolio. The fund held 2,450,320 shares as of September 30th, up 2,445,420 since the fund’s last filing.

Linear Technology Corp (NASDAQ: LLTC) represents 3.68% of the fund’s reported portfolio. The fund held 277,978,000 shares as of September 30th, up 4,500,000 since the fund’s last filing.

Plains Exploration & Production Company (NYSE: PXP) represents 2.73% of the fund’s reported portfolio. The fund held 6,113,815 shares as of September 30th, down 412,585 since the fund’s last filing.

Flextronics International (NASDAQ: FLEX)) represents 2.47% of the fund’s reported portfolio. The fund held 157,805,000 shares as of September 30th, up 14,166,000 since the fund’s last filing.

Verizon Communications Inc (NYSE: VZ) represents 2.24% of the fund’s reported portfolio. The fund held 4,578,953 shares as of September 30th, up 3,984,100 since the fund’s last filing.

Lawson Software Inc (NASDAQ: LWSN) represents 2.2% of the fund’s reported portfolio. The fund held 143,028,000 shares as of September 30th, up 128,948,000 since the fund’s last filing.

AT&T Inc (NYSE: T) represents 1.83% of the fund’s reported portfolio. The fund held 4,209,497 shares as of September 30th, up 3,418,497 since the fund’s last filing.

InterOil Corp (NYSE: IOC) represents 1.79% of the fund’s reported portfolio. The fund held 2,817,650 shares as of September 30th, up 957,650 since the fund’s last filing.

DirectTV Group Inc (NASDAQ: DTV) represents 1.77% of the fund’s reported portfolio. The fund held 3,984,666 shares as of September 30th, up 3,797,66 since the fund’s last filing.

Best Buy Inc (NYSE: BBY) represents 1.75% of the fund’s reported portfolio. The fund held 2,892,800 shares as of September 30th, up 1,103,300 since the fund’s last filing.

Weatherford International Ltd (NYSE: WFT) represents 1.65% of the fund’s reported portfolio. The fund held 4,922,313 shares as of September 30th, up 3,180,970 since the fund’s last filing.

Suncor Energy Inc (NYSE: SU) represents 1.47% of the fund’s reported portfolio. The fund held 2,643,100 shares as of September 30th, up 1,958,700 since the fund’s last filing.

Goldman Sachs Group Inc (NYSE: GS) represents 1.23% of the fund’s reported portfolio. The fund held 415,100 shares as of September 30th, unchanged since the fund’s last filing.

Walgreen Co (NYSE: WAG) represents 1.03% of the fund’s reported portfolio. The fund held 1,699,600 shares as of September 30th, up 242,700 since the fund’s last filing.

Wal-Mart Store Inc (NYSE: WMT) represents 0.88% of the fund’s reported portfolio. The fund held 1,116,040 shares as of September 30th, up 1,026,330 since the fund’s last filing.

Yahoo! Inc (NASDAQ: YHOO) represents 0.21% of the fund’s reported portfolio. The fund held 25,000 shares as of September 30th, down 105,800 since the fund’s last filing.

Garrett W. McIntyre

Posted in General Tagged: BBY, DTV, FLEX, George Soros, GLD, GS, HES, IOC, LLTC, LSI, LWSN, PBR, POT, PXP, SU, T, VZ, WAG, WFT, WMT, YHOO

Oil & Energy Upgrades & Downgrades (APA, DNR, E, XOM, OXY, PXP, RDS.A, SPWRA)

247wallst — Mon, 16 Mar 2009 12:20:11 +0000

These are the top analyst calls we have seen in the oil patch and in the energy sector this Monday morning:

Apache (NYSE: APA) Raised to Outperform at Credit Suisse.
Denbury Resources Inc. (NYSE: DNR) Cut to Neutral at Credit Suisse.
ENI S.p.A. (NYSE: E) Raised to Overweight at JPMorgan.
Exxon Mobil (NYSE: XOM) Started as Buy at Citigroup.
Occidental Petroleum (NYSE: OXY) Cut to Neutral at Credit Suisse.
Plains Exploration (NYSE: PXP) Cut to Neutral at Credit Suisse.
Royal Dutch Shell (NYSE: RDS.A) Cut to Market Perform at Sanford Bernstein.
SunPower (NASDAQ: SPWRA) Cut to Underweight at Morgan Stanley.

JON C. OGG

Posted in Alternative Energy, Analyst Calls, Oil & Gas Tagged: APA, DNR, E, OXY, PXP, RDS.A, SPWRA, XOM

What If Chesapeake Production Cuts Work? (CHK, PXP, BP)

247wallst — Mon, 02 Mar 2009 15:26:40 +0000

Chesapeake Energy Corporation (NYSE: CHK) is tired of not having profitable results from a key operation. The largest natural gas player announced that it will cut its production by 7% and is considering a further reduction of 10% in drilling for 2009. Natural gas prices of about $2.70/thousand cubic feet get the blame. According to the company’s CEO, that’s a price at which most natural gas production is unprofitable.

The company expects the low prices to constrain drilling across the industry, and for demand to pick up by the end of the year, “if not sooner.” Chesapeake does not say why it thinks demand will pick up.

Chesapeake also had to rewrite its joint venture agreement with Plains Exploration & Production Company (NYSE: PXP). The $1.65 billion deal counted on higher gas prices and steadier production from Chesapeake’s Haynesville Shale. Chesapeake has granted Plains a one-time option, exercisable from June 15, 2010, through June 30, 2010, to skip paying the final installment on the purchase. If Plains should exercise its option, it will need to return 50% of all the joint venture assets to Chesapeake. Chesapeake estimates that the value of Plains’ investment will have about doubled by the end of 2010. Plains remains on the hook for paying for 50% of Chesapeake’s drilling costs through December 2010.

Chesapeake’s shares are down around 7% this morning, and Plains’s shares are down about 6%. As Chesapeake’s share price falls, will the rumors about a takeover by BP plc (NYSE: BP) start up again?

Paul Ausick
March 2, 2009

Posted in Oil & Gas Tagged: BP, CHK, PXP

Chesapeake Wants To Print Money (CHK, BP, STO, PXP)

247wallst — Mon, 01 Dec 2008 10:06:31 +0000

Chesapeake Energy Corp. (NYSE:CHK) filed three documents with the SEC on Friday. One replaces a shelf registration that expires on December 5, the second authorizes the issuance of up to 50 million shares of Chesapeake stock "in connection with the acquisition of assets, businesses or securities of other companies," and the third extends an agreement with three of its sales agents to sell up to $1 billion in shares in 2009 and beyond. Chesapeake shares dived more than 15% on the news. The first and third of these filings are pretty normal. The second,however, leaps off the page.

Chesapeake wants the ability to sellanother 50 million shares? That’s a dilution of a bit more than 8% oncommon shares outstanding at the end of the third quarter of 2008. Justthe idea that Chesapeake might need that sent shivers of doubt up manyspines.

After all, the company has been raising truckloads of cash by sellingassets. Since March, BP plc (NYSE:BP), StatoilHydro (NYSE:STO), andPlains Exploration (NYSE:PXP) have together kicked in about $6 billionin cash for pieces of Chesapeake. Othertransactions have yielded another $4 billion. How much cash does thecompany need?

The answer is, "A lot." Chesapeake states the problem succinctly in itsthird quarter 10-Q: "We anticipate that our remaining 2008 and 2009budgeted exploration and development capital expenditures, togetherwith other capital expenditure requirements, will exceed our cash flowfrom operations and our borrowing capacity under our revolving creditfacilities."

The company used the cash from asset sales to repay its outstandingdebt. Then, of course, it re-borrowed the money. Chesapeake has alsoissued more than 50 million shares of common stock this year and twodebt offerings totaling more than $4.7 billion.

In it’s third quarter 10-Q filing, Chesapeake noted that it wasreducing capital spending for the fourth quarter of 2008 to $2.4-$2.8billion and planned spending for 2009 would drop to the range of$7.0-$8.3 billion. That is still a lot of money, but the first thing togo would almost certainly have been additional acquisitions. That wouldmean no or very little growth. Thus, the filing to issue new stock tofund acquisitions.

The market remains unhappy with Chesapeake this morning. The shareprice is off more than 7%, to under $16. The 52-week trading range is$11.99-$74.00.

Paul Ausick
December 1, 2008

Posted in Oil & Gas, Secondary Offering Tagged: BP, CHK, PXP, STO

Chesapeake Energy: Still Raising Cash (BP, CHK, STO, PXP)

247wallst — Tue, 11 Nov 2008 09:50:07 +0000

If BP plc (NYSE:BP) plans to buy Chesapeake Energy (NYSE:CHK) as the rumor mill has suggested, it had better hurry up while there’s still something left. Early this morning, Chesapeake announced that it had sold a 32.5% interest in its Appalachian Marcellus Shale assets to StatoilHydro (NYSE:STO), Norway’s state oil company. Chesapeake banked $3.375 billion in exchange for about 600,000 net acres.

The deal is similar to the oneChesapeake made with BP for BP’s 25% stake in Chesapeake’s FayettevilleShale assets. StatoilHydro pays $1.25 billion in cash at closing andagrees to fund 75% of Chesapeake’s cost of drilling its remainingassets up to a total of another $1.25 billion. The rest of the salesprice gives StatoilHydro the rights to 32.5% participation in any newleases Chesapeake acquires. The transaction is expected to close by theend of 2008. Chesapeake also sold a working interest in its HaynesvilleShale assets to Plains Exploration (NYSE:PXP) earlier this year.

Chesapeake’s CEO commented, "These joint ventures clearly demonstratethe enormous value of Chesapeake’s shale natural gas assets and theunique capability of our organization to develop them." Right.Developing assets by selling them. That’s a good one.

Paul Ausick
November 11, 2008

Posted in Oil & Gas Tagged: BP, CHK, PXP, STO