Current CHK Stock Info

Chesapeake Energy upsizes debt offering from $850 million

Chesapeake Energy (ticker: CHK) announced last week that it has upsized its private placement to $1.1 billion from an original amount of $860 million of aggregate principal amount. The offer is for 5.5% convertible senior notes due 2026, and includes a 30-day option to purchase up to an additional $150 million aggregate principal amount of notes, according to the company’s press release.

The notes will be convertible, under certain specified circumstances, into cash, Chesapeake common stock or a combination of cash and Chesapeake common stock, at Chesapeake’s election. The conversion rate will initially equal 116.7134 shares of common stock per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $8.57 per share of common stock). The conversion rate will be subject to adjustment in certain events but will not be adjusted for any accrued and unpaid interest. The notes may not be redeemed by CHK prior to September 15, 2019.

A note from KLR today indicated that the company will likely need to do more in order to fund itself through 2018, however.

“Chesapeake’s $4 billion senior secured revolver requires the company to maintain $0.5 billion in liquidity and support ~$0.4 billion of outstanding letters of credit pro forma settlement of the 2019 Notes litigation (collateralized by a supersedeas bond). Therefore, under the terms of the credit facility, Chesapeake has access to ~$3.1 billion of bank line capacity,” the note said.

“At strip pricing, given net asset sales, debt financing and equity exchanges to date, along with ~$3.1 billion of available revolver capacity, Chesapeake requires ~$0.9 billion of incremental liquidity by late ’18 to fund the ~$1.25 billion of debt maturities through YE’18 and execute the capital plan.”

Department of Justice issues subpoena

Chesapeake disclosed that the U.S. Department of Justice issued a subpoena to the company that seeks information on the company’s accounting methods for the acquisition and classification of oil and gas properties, according to a report by ABC News.

The Justice Department and other agencies asked Chesapeake for documents, testimony and information related to the company’s oil and gas leases and purchases as part of its antitrust investigation.

University of Central Oklahoma economics professor Jeremy Oller, an expert witness on antitrust legal matters, said the Justice Department is likely examining other oil and gas companies as part of the investigation.

Oller said there are two possible sections of antitrust law the Justice Department could use.

One antitrust claim is a monopoly allegation, in which a company engages in exclusionary or anti-competitive behavior in an attempt to monopolize the market, he said. The monopoly claim type, known as Section 2, can also be applied if a company has a geographic stranglehold on the market and has a dangerous probability of achieving monopoly power, Oller said.

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