Chesapeake Targets $12 Billion in Asset Sales, Moody's Lowers Outlook

Chesapeake Energy Corp is seeking as much as $12 billion from assets sales and joint ventures to cope with a cash crunch amid rising debt and tumbling gas prices.

Chesapeake, the second-biggest U.S. natural-gas producer after Exxon Mobil Corp, has a strategy to increase output from more profitable wells that produce crude oil and natural gas that is rich in liquid content. The company expects to get $10 billion to $12 billion from transactions including the potential sale of all its oil and gas fields in the Permian Basin of Texas and New Mexico, Chesapeake said in a statement.

Chesapeake reported last month that it slashed its long-term debt by just over $2 billion over the past year and expected to meet its 25 percent two-year debt reduction goal by the end of this year, regardless of natural gas prices. It anticipates proceeds of about $2 billion during 2012 involving a portion of its midstream assets, service company assets and miscellaneous investments. Chesapeake said it will sell $1 billion of senior notes due in 2019 and use the proceeds to repay bank credit.

In the next two months, Chesapeake will receive an up-front payment for future production in the Texas Granite Wash formation. The company also plans to sell stakes in a new subsidiary that will hold assets in the Cleveland and Tonkawa deposits in Oklahoma.