Friday, May 11, 2012

Is This Why $CHK is Sinking?

Saw a note from Bloomberg about a delay in asset sales being the reason for the fall in Chesapeake late today.

They just filed their 10Q and all I can find so far is this little nugget which sounds more like careful wording from their accountant than an actual delay in asset sales.

And I'm a little confused, if they can sell $12 billion in assets, wouldn't that give them more cash than they have debt?

As part of our asset monetization planning and capital expenditure budgeting process, we closely monitor the resulting effects on the amounts and timing of our sources and uses of funds, particularly as they affect our ability to maintain compliance with the financial covenants of our corporate revolving bank credit facility. While asset monetizations enhance our liquidity, sales of producing natural gas and oil properties adversely affect the amount of cash flow we generate and reduce the amount and value of collateral available to secure our obligations, both of which are exacerbated by low natural gas prices. Thus the assets we select and schedule for monetization, our budgeted capital expenditures and our commodity price forecasts are carefully considered as we project our future ability to comply with the requirements of our corporate credit facility. As a result, we may delay one or more of our currently planned asset monetizations, or select other assets for monetization, in order to maintain our compliance. Continued compliance, however, is subject to all the risks that may impact our business strategy.

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