Amid heat from critics, Chesapeake standing by growth plan

Chesapeake Energy Corp. doubled down Tuesday on a plan that has drawn criticism from shareholders over its aggressive approach to expand during a major cashflow crunch.

The nation’s second-largest natural gas producer after Exxon Mobil Corp, in an investor presentation posted on its website Tuesday, said it has “withstood an unprecedented negative media campaign” over the last five weeks, which has prompted 1.2 billion shares of company’s stock to trade hands, nearly double the amount of its shares outstanding.

Chesapeake’s market capitalization, or the total value of its shares, has fallen from around $11.3 billion on May 7 to around $9.8 billion today.

“While damaging in the short run to our reputation, these attacks have failed, and will continue to fail, to reduce the value of the company’s assets and our long-term attractiveness to investors,” the presentation said.

Chesapeake said it will continue with its strategy to expand its production by 25 percent and cut its debt by 25 percent by the end of the year, its so-called 25/25 plan. The strategy has been heavily criticized, including by the company’s largest shareholder, Southeastern Asset Management, which called the targets “arbitrary” and pushed for Chesapeake to instead cut its spending amid a cash shortage caused by low natural gas prices.

Chesapeake appears to have been unmoved by the criticism and will move forward with its plans, according to the presentation.

“Successful asset sales, ongoing transition to liquids and moving to an asset harvest strategy from an asset capture strategy will carry the day,” the company said.

Chesapeake highlighted its land holdings as “the best collection of (exploration and production) assets in the U.S.” The company’s Chief Executive Officer Aubrey McClendon has said the land holdings are worth as much as $60 billion.

The company also noted its more than 275 percent growth in liquids production, from 30,000 barrels a day in 2009 to 114,000 barrels a day this year. The company’s planned shift to more liquids production is meant to offer more balance and profitability during a time of weak domestic demand for natural gas.

The presentation also touched on the steep drop in natural gas prices over the last year, projecting better days ahead upon various potential future price points if natural gas rebounds.

“Imagine the boost CHK’s stock will receive when natural gas prices begin recovery and accelerate value creation, primarily driven only by liquids plays today,” the company said, referring to its stock symbol.