Chesapeake Energy CEO Tries to Calm the Waters
HOUSTON--Chesapeake Energy Corp. Chief Executive Aubrey McClendon said Monday that a $3 billion unsecured loan from Goldman Sachs Group Inc. and Jefferies Group Inc. would enable the gas driller to complete the asset sales it needs for survival from "a position of strength."</br></br>He also said the company is delaying a $1 billion deal tied to the Eagle Ford oil shale in Texas but that other major asset sales are on track.</br></br>The new loan, which the embattled company disclosed late Friday, would help Chesapeake repay borrowings from a revolving credit line that could be tightened by the effect of low natural-gas prices on the company's reserves. That tightening, which the company described as a risk in a filing Friday, could restrict sales of energy assets, which lenders could require to be pledged as increased collateral amid lower gas prices. The new loan would be repaid with the proceeds of asset sales that Chesapeake plans to execute in the third quarter--deals that Mr. McClendon said are on track.</br></br>Low natural-gas prices have forced Oklahoma City-based Chesapeake, the second-largest producer of the commodity in the U.S., into a major transition. The company now seeks to focus on more profitable oil instead, but to do so it must engage in massive spending--on top of the large debt it has already accumulated increasing its natural-gas reserves. To raise the money, Chesapeake is engaging in different types of deals, including selling down stakes in positions it has aggressively built during the last decade.</br></br>He said the company chose to take the loan from Goldman and Jefferies to assure investors that it is well positioned to evolve from being primarily a natural-gas producer to one more focused on oil.