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Chesapeake Revises and Reaffirms Revolving Credit Agreement


Chesapeake Energy Corporation CHK has revised and reaffirmed its senior secured revolving credit facility agreement.

Initially, the revised and reaffirmed facility received commitments from 15 institutions worth $3.8 billion, which surpassed its limit. The company was targeting a borrowing base of $3 billion.

Chesapeake is divesting assets worth $2 billion in the Utica Shale, which is anticipated to close in the fourth quarter of 2018. The initial borrowing base does not include any of these properties. Therefore, the borrowing base will remain unaffected on the closure of the transaction. The maturity of the credit facility is due in September 2023. This credit facility will be utilized by Chesapeake for working capital and general corporate purposes.

The five-year renewal of the credit facility emphasizes the company’s commitment to growth. The reduced borrowing base of $3.0 billion will result in lowering costs as well as maintaining sufficient liquidity. Chesapeake is well placed to lower outstanding debt as well as boost operating and financial results.

Chesapeake is an independent oil and gas company engaged in the acquisition, development and production of onshore U.S. natural gas resources. With the sale of Utica assets, the company continues to hold some of the finest locations in the Eagle Ford and Marcellus. The company is on track with its plan of reducing long-term debt through monetizing assets and cutting lease-hold spending.

Chesapeake boasts a leading position among the top unconventional liquids-rich plays, comprising Eagle Ford, Granite Wash, Cleveland, Tonkawa and Mississippi Lime along with Niobrara in the Marcellus, Haynesville/Bossier and Barnett natural gas shale plays.

Price Performance

In the past year, Chesapeake’s shares have declined 2% against the industry’s 13.2% rise.

Zacks Rank & Stocks to Consider

Chesapeake currently carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Petroleo Brasileiro S.A. PBR or Petrobras SA, Helix Energy Solutions Group, Inc HLX and TC Pipelines, LP TCP. All these stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Petrobras is the largest integrated energy firm in Brazil and one of the major players in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.

Helix Energy offers specialty services to the offshore energy industry. The company delivered an average positive earnings surprise of 66.7% in the trailing four quarters.

TC Pipelines purchases, owns and actively participates in the management of U.S.-based natural gas pipelines and related assets. The company delivered an average positive earnings surprise of 3.7% in the last four quarters.

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