Chesapeake sheds more assets in turnaround bid
HOUSTON, Aug 9 (Reuters) - Chesapeake Energy Corp has sold its stakes in trucking and natural gas companies and is trying to shed real estate in Oklahoma City, the company told regulators this week, as its new chief executive attempts to turn it around.
The second-largest U.S. natural gas producer has slashed spending and pledged capital discipline following last year's liquidity crunch, brought on by years of heavy spending on acreage in U.S. shale formations and low natural gas prices.
While it's now more financially fit, the company still faces a gap between operating cash flow and capital expenditure that analysts at Barclays estimate at $1.8 billion this year. But asset sales and cash on hand may help fill the shortfall.
Chief Executive Doug Lawler, who replaced former CEO Aubrey McClendon in May, told investors on the company's second-quarter earnings call last Thursday that he and senior management have undertaken a comprehensive review of all the company's assets, partnerships and investments in other companies to determine which are not providing "the proper returns" or a competitive advantage.
"I think when you are investing in so many different things, it just takes you away from concentrating on your core business," said Mike Breard, analyst with Hodges Capital Management in Dallas on Friday. "They've got some good properties but they've tied it up with all this miscellaneous stuff."
Lawler declined to provide details of the review on the earnings call, but a 99-page filing the Oklahoma-based company made to the U.S. Securities and Exchange Commission shows the process is well underway.
Chesapeake is actively marketing properties in Oklahoma City that are not part of its red-brick Georgian-style corporate campus, it said in its quarterly filing with the SEC on Tuesday.
The company has written down the value of all the properties it has for sale, including those previously on the market in Fort Worth, Texas, recording an impairment loss totaling $189 million, according to the filing.
McClendon presided over a spree of more than 100 real estate purchases in Oklahoma City in recent years, worth more than $240 million, according to state property records.
Apart from office buildings and homes ringing the 100-acre corporate campus, the company also bought a nearby shopping center and built a luxury retail complex that includes a Whole Foods grocery store. Chesapeake is currently leasing, not selling, space in those complexes, according to its real estate unit's web site.
A spokeswoman declined to comment on what properties are being marketed for sale in Oklahoma City.
The company is also evaluating its interest in affiliate companies, opting to sell in some cases.
On July 30, Chesapeake sold its interest in trucking company Big Star Crude for $3 million. The company sold its 10 percent interest in natural gas producer Gastar Exploration Ltd for $10 million cash in the current quarter, according to the filing.
Chesapeake exited investments in Clean Energy Fuels Corp , which provides natural gas fuel for transportation. The carrying value of its $10 million investment in a 1.1 stake in the company backed by T. Boone Pickens has increased by $3 million before the stake sale last month.
It sold a $100 million investment in Clean Energy Fuels convertible notes for $85 million in cash to a buyer who also assumed a commitment to buy the third and final $50 million tranche of convertibles.