The hard-pressed Chesapeake Energy Corporation’s (NYSE:CHK) efforts to restructure is pacing up. The company’s management is striving extremely hard to decrease leverage from its balance sheet so that it could stay afloat in the ongoing downturn.
The company has seen its downfall really quickly. Ahead of the shale boom, the second largest natural gas producer in the US took on massive debt to tap into opportunities. But contrary to expectations, oil and natural gas prices fell steeply that created hardships in repaying its principle and making timely interest payments.
Recently, the company has piled up enough cash to meet its debt obligation till 2018, which has removed the overhang of bankruptcy concerns. Following the placement, the company’s management announced that now, it has $1 billion in the form of cash paired with the undrawn revolving credit facility. The company believes that the cash proceeds have provided Chesapeake with enough liquidity to address the remaining debt maturities through 2018.
The oil and natural gas exploration company has sold worth billion dollars of assets and has also suspended its drilling programs since mid-2013 as low natural gas prices further escalated the company’s misery.
Furthermore, Chesapeake intends to pursue a further divestiture of $2-$3 billion to reduce leverage from its balance sheet in the next two-three years. That said, equity research firm, Wunderlich is of the opinion that the plan seems to be impressive as the company is gradually inching towards cash flow neutrality.
On a side note, the sell-side firm has given a price target of $10, accompanied with a Buy rating. Chesapeake’s stock price closed down by 4.51% on Friday and has gained 44.32% in stock price since the start of the year.