Chesapeake Energy focuses on debt cuts, ‘comfortable’ with liquidity

By Devika Patel

Knoxville, Tenn., May 4 – Chesapeake Energy Corp. management is continuing to keep debt as its primary focus and hopes to pay down another $2 to $3 billion of its borrowings, an objective which is now the company’s “primary financial focus” and will remain so until it meets its goal.

“We will continue to optimize our portfolios and work toward our goal of removing another $2 to $3 billion of debt off our books,” executive vice president and chief financial officer Domenic J. Dell’Osso, Jr. said on the company’s first quarter earnings conference call on Thursday.

“The primary financial focus of the company is going to continue to be to drive our debt balance lower and meet our long-term debt targets.

“We will always be focused on reducing our leverage until we hit our goal,” he said.

Dell’Osso said that the company is comfortable with its current level of liquidity but that the management team does not want to divert this liquidity into anything other than reducing leverage unless there’s a “really high rate of return” that would generate more cash.

“The focus remains debt reduction, liquidity.

“We are comfortable with the liquidity we have, [but] we don’t want to see it eroded to grow production, grow cash flow unless it’s doing so in a really high rate of return way that is additive to our overall efforts of reducing leverage and putting the company in a position to generate free cash flow,” Dell’Osso said.

“We’re going continue to improve our operations and continue to improve our balance sheet and look for opportunities to reduce our debt further as quickly as possible,” he said.

As of March 31, Chesapeake’s principal debt balance was approximately $9.1 billion with $249 million in cash on hand, compared to $10 billion with $882 million in cash on hand as of Dec. 31, 2016.

The company’s total liquidity as of March 31 was approximately $3.3 billion, which included cash on hand and borrowing capacity of approximately $3.1 billion under the company’s senior secured revolving credit facility, which had no outstanding borrowings, and $697 million used for various letters of credit.

Chesapeake Energy is an Oklahoma City-based oil and gas producer.

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