Credit rating agency
Chesapeake’s stock price surged 5.9 percent Monday following the credit announcement and is up 6.1 percent from Thursday’s closing price before the
Moody’s said it is reviewing Chesapeake’s corporate family rating (CFR) of B3, which is six notches below investment grade, and its senior unsecured rating of Caa1, which is seven levels below investment grade. The agency said it is likely to upgrade both scores by one notch.
“Based on the planned debt reduction and other benefits of the transaction, Moody’s believes that the CFR is likely to be upgraded to B2 and senior unsecured ratings upgraded to B3, accordingly,” Moody’s said in a statement.
The credit ratings agency said it is reviewing Chesapeake’s credit ratings because the company is planning to use proceeds from the sale to further cut debt and because Chesapeake executives said they will focus more heavily on the oil-rich
“This transaction will significantly reduce absolute debt levels and further the company’s portfolio repositioning toward liquids from natural gas,”
Chesapeake operates 920 wells in the
“It’s a very strong oil growth asset for us,” Lawler said in a
Moody’s said Monday it will complete its Chesapeake ratings review when the
The review also will look at Chesapeake’s cash flow, capital spending and overall financial performance for 2019, including the company’s price hedging position in place for 2019, Moody’s said.
Chesapeake has relied heavily on assets sales to repay more than $12 billion in debt over the past five years. Lawler said last week the company now is to the point where it will reduce debt through cash flow rather than primarily through asset sales.
“This large asset sale is a strategic pivot for the company going forward in that we will be turning toward our existing assets for EBITDA (earnings before interest, taxes, depreciation and amortization) growth,” Lawler said. “That’s not to say we would not sell additional assets going forward, but asset sales will no longer be our principal target to achieve debt reduction. We’re going to do that organically through growth.”
Chesapeake finished 2017 with about $9.2 billion in debt.
Chesapeake stock gained 26 cents, or 5.9 percent, Monday to close at $4.67 a share.
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