Chesapeake Energy Corporation (NYSE:CHK) today announced an
updated financial strategy. Highlights include:
- Elimination of common stock dividend
effective 2015 third quarter
- Sale of CHK Cleveland Tonkawa,
L.L.C. properties and adjacent assets anticipated to close in 2015
third quarter; redemption of preferred shares in CHK Cleveland
Tonkawa subsidiary
- Declaration of preferred stock
dividends
Due to the current commodity price environment for oil, natural
gas and natural gas liquids, and the resulting reduction in capital
available to invest in its high-quality assets, Chesapeake Energy
will eliminate its common dividend effective 2015 third quarter and
redirect the cash into its 2016 capital program to maximize the
return available to its shareholders.
Doug Lawler, Chesapeake’s Chief Executive Officer, commented,
“We received approval from our Board of Directors to eliminate the
common stock dividend of $0.35 per share annually, which is
applicable to the 2015 third quarter. We believe this decision is
prudent as we continue to invest and redirect as much capital as
possible into our world-class assets. The elimination of the common
stock dividend will save approximately $240 million annually. This,
along with the redemption of the preferred shares in our CHK
Cleveland Tonkawa subsidiary, is part of a broader disciplined
approach that began two years ago to decrease the company’s
financial complexity and increase our liquidity. The company’s
liquidity position remains extremely strong with more than $2
billion of unrestricted cash on our balance sheet and an undrawn $4
billion revolving credit facility as of June 30, 2015. We continue
to move forward with multiple opportunities that will strengthen
our cash flow generation capabilities, and I look forward to future
announcements regarding the ways we are creating additional value
in the months ahead.”
Chesapeake to Eliminate Future Financial and Drilling
Obligations with the Sale of Properties and Redemption of Preferred
Shares in CHK Cleveland-Tonkawa Subsidiary
Chesapeake, through one of its affiliates, has signed a
definitive agreement to sell substantially all of the properties
held by CHK Cleveland Tonkawa, L.L.C. (the “LLC”) to FourPoint
Energy, LLC (“FourPoint”). Chesapeake will use the proceeds from
this sale, plus other cash from the LLC, to redeem its preferred
interest in the LLC. Other than customary adjustments to the
purchase price and certain indemnity obligations in connection with
the sale, Chesapeake will not be required to pay any additional
amounts for the redemption. Upon closing of the transaction,
Chesapeake will eliminate approximately $75 million in annual
preferred dividend payments, the 3.75% overriding royalty interest
payments associated with the properties and all related future
drilling and override conveyance commitments. Additionally,
Chesapeake signed a definitive agreement to sell noncore adjacent
properties centered in Roger Mills and Ellis counties in Oklahoma
to FourPoint for approximately $90 million in cash. Chesapeake’s
net production from the combined assets was approximately 15
thousand barrels of oil equivalent per day in the 2015 second
quarter.
Chesapeake’s Board of Directors Declared Dividends on Its
Outstanding Convertible Preferred Stock
4.50%
5% (2005B) 5.75%
5.75% (Series A) NYSE Symbol CHK Pr D
N/A N/A N/A
Date of
Original Issue September 14, 2005
November 8, 2005 May 17, 2010 May 17,
2010
Registered CUSIP 165167842
165167826 165167768 165167750
144A
CUSIP N/A 165167834
165167776 165167784
RegS CUSIP
N/A N/A U16450204
U16450113
Clean (no legends) CUSIP N/A
N/A 165167768 165167750
Par
Value per Share $0.01 $0.01
$0.01 $0.01
Shares Outstanding
2,558,900 2,095,615 1,497,000
1,100,000
Liquidation Preference per Share
$100 $100 $1,000
$1,000
Record Date September 1, 2015
August 1, 2015 August 1, 2015
August 1, 2015
Payment Date September
15, 2015 August 15, 2015 August 15,
2015 August 15, 2015
Amount per Share
$1.125 $1.25 $14.375
$14.375
2015 Second Quarter Financial and Operational Results
Conference Call Information
The company has scheduled to release its 2015 second quarter
operational update and financial results before market open on
Wednesday, August 5, 2015. A conference call to discuss the results
has been scheduled for the same day at 9:00 am EDT. The telephone
number to access the conference call is 913-312-0648 or
toll-free 800-930-1344. The passcode for the call is
8058511. We encourage those who would like to participate in
the call to place calls between 8:50 and 9:00 am EDT. For those
unable to participate in the live conference call, a replay will be
available for audio playback at 2:00 pm EDT on Wednesday, August 5,
2015, and will run through 2:00 pm EDT on Wednesday, August 19,
2015. The number to access the conference call replay is
719-457-0820 or toll-free 888-203-1112. The passcode
for the replay is 8058511. The conference call will also be
webcast live at www.chk.com in the “Investors” section of the
company’s website. The webcast of the conference will be available
on the website for one year.
Chesapeake Energy Corporation (NYSE:CHK) is the
second-largest producer of natural gas and the 11th largest
producer of oil and natural gas liquids in the U.S.
Headquartered in Oklahoma City, the company's operations are
focused on discovering and developing its large and geographically
diverse resource base of unconventional oil and natural gas assets
onshore in the U.S. The company also owns substantial
marketing and compression businesses. Further information is
available at www.chk.com where Chesapeake routinely
posts announcements, updates, events, investor information,
presentations and news releases.
This news release and the accompanying Outlook include
"forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are
statements other than statements of historical fact. They include
statements that give our current expectations or forecasts of
future events, production, production growth and well connection
forecasts, estimates of operating costs, planned development
drilling and expected drilling cost reductions, capital
expenditures, expected efficiency gains, anticipated assets sales
and proceeds to be received therefrom, projected cash flow and
liquidity, business strategy and other plans and objectives for
future operations, and the assumptions on which such statements are
based. Although we believe the expectations and forecasts reflected
in the forward-looking statements are reasonable, we can give no
assurance they will prove to have been correct. They can be
affected by inaccurate or changed assumptions or by known or
unknown risks and uncertainties.
Factors that could cause actual results to differ materially
from expected results include those described under "Risk Factors”
in Item 1A of our annual report on Form 10-K and any updates to
those factors set forth in Chesapeake's subsequent quarterly
reports on Form 10-Q or current reports on Form 8-K (available at
http://www.chk.com/investors/sec-filings). These risk factors
include the volatility of oil, natural gas and NGL prices;
write-downs of our oil and natural gas carrying values due to
declines in prices; the availability of operating cash flow and
other funds to finance reserve replacement costs; our ability to
replace reserves and sustain production; uncertainties inherent in
estimating quantities of oil, natural gas and NGL reserves and
projecting future rates of production and the amount and timing of
development expenditures; our ability to generate profits or
achieve targeted results in drilling and well operations; leasehold
terms expiring before production can be established; commodity
derivative activities resulting in lower prices realized on oil,
natural gas and NGL sales; the need to secure derivative
liabilities and the inability of counterparties to satisfy their
obligations; adverse developments or losses from pending or future
litigation and regulatory proceedings, including royalty claims;
the limitations our level of indebtedness may have on our financial
flexibility; charges incurred in response to market conditions and
in connection with actions to reduce financial leverage and
complexity; drilling and operating risks and resulting liabilities;
effects of environmental protection laws and regulation on our
business; legislative and regulatory initiatives further regulating
hydraulic fracturing; our need to secure adequate supplies of water
for our drilling operations and to dispose of or recycle the water
used; federal and state tax proposals affecting our industry;
potential OTC derivatives regulation limiting our ability to hedge
against commodity price fluctuations; impacts of potential
legislative and regulatory actions addressing climate change;
competition in the oil and gas exploration and production industry;
a deterioration in general economic, business or industry
conditions; negative public perceptions of our industry; limited
control over properties we do not operate; pipeline and gathering
system capacity constraints and transportation interruptions; cyber
attacks adversely impacting our operations; and interruption in
operations at our headquarters due to a catastrophic event.
In addition, disclosures concerning the estimated contribution
of derivative contracts to our future results of operations are
based upon market information as of a specific date. These market
prices are subject to significant volatility. Our production
forecasts are also dependent upon many assumptions, including
estimates of production decline rates from existing wells and the
outcome of future drilling activity. Expected asset sales may not
be completed in the time frame anticipated or at all. We caution
you not to place undue reliance on our forward-looking statements,
which speak only as of the date of this news release, and we
undertake no obligation to update any of the information provided
in this release or the accompanying Outlook, except as required by
applicable law.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150721005466/en/
Chesapeake Energy CorporationInvestor Contact:Brad
Sylvester, CFA, 405-935-8870ir@chk.comorMedia Contact:Gordon
Pennoyer, 405-935-8878media@chk.com
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