Chesapeake pipeline sale gets lukewarm reviews

Chesapeake Energy Corp.’s sale this week  of $2.16 billion in pipeline assets did little to impress analysts and investors who remain wary of the company’s progress.

Chesapeake agreed to terms with Access Midstream Partners for the pipeline assets, located primarily in the Marcellus, Utica, Eagle Ford, Haynesville and Niobrara shale plays, the company said Tuesday.

The sale bumps up the company’s total current and anticipated pipeline asset sales to $2.75 billion by the end of the first quarter of 2013, Chesapeake said.

Chesapeake shares fell 13 cents to $16.96  Wednesday  on the New York Stock Exchange.

The company has yet to sell other land assets that it planned to unload by the end of the year to help it reach a goal of cutting its long-term debt from nearly $16 billion to under $9.5 billion by the end of the year. It appears the company will fall well short of that goal, likely slashing the  debt to $12 billion, according to a projection from analyst Tim Rezvan, of Sterne Agee.

Chesapeake,  the nation’s second-largest natural gas producer after Exxon Mobil Corp.,  has struggled with cash shortfalls since natural gas prices plummeted earlier this year and cut into its revenue.

The company has been using asset sales and further loans to fund a shift in operations away from natural gas and toward oil.

The latest sale was a step in the right direction, but it involved a larger amount of assets than expected, likely because the company has struggled to make progress with land sales, according to James Sullivan, an analyst for Alembic Global Advisors.

Phil Weiss, an analyst for Argus Research, said the sale price appeared to be as much as $200 million below Chesapeake’s initial projections for the properties.

“They’re selling some assets, which they need to do, so that’s good because they need to raise cash,” Weiss said. “But the amount, from what I could tell, it’s less than what they said before.”
The company has regularly said it would cut down its debt and its expenses, but has failed to achieve its stated goals so far, Weiss said.

“I continue to be of the view with Chesapeake in terms of show me what you’re going to do instead of telling me about it,” Weiss said.

Chesapeake came under intense scrutiny earlier this year as the lowest natural gas prices in a decade slashed earnings and sent the company’s stock price into a freefall. Investors, including the pension funds in New York and California, publicly lashed out at management as part of a shareholder effort to force a shakeup of the company’s board of directors. Although the company has taken some steps to change its operations since then, it has yet to achieve several key goals.

The company’s stock remains down 24 percent since the start of the year.