Fitch affirms Chesapeake Energy

Fitch Ratings said it affirmed the ratings of Chesapeake Energy Corp., including the BB issuer default rating, BB senior unsecured debt rating, BBB- senior secured revolving credit facility and hedge facility and B+ convertible preferred stock.

The outlook is stable.

The affirmation follows the company's announcement that it will acquire 13 drilling rigs from Martex Drilling Co. LLP for $150 million and 264 billion cubic feet of proven reserves for $796 million.

Fitch said the ratings continues to reflect Chesapeake's profile as a large, aggressive acquirer and operator of primarily natural gas assets onshore in the United States. With pro forma proven reserves of 7.6 trillion cubic feet on Sept. 30, Chesapeake ranks as one of the largest independent oil and gas producers in the United States and it maintains a "low risk" reserve base that generates modest finding, development and lifting costs and strong net realizations.

The agency said it remains concerned by the rising cost of acquisitions and Chesapeake's leverage versus its peer group. While the balanced funding for acquisitions at roughly 50% debt and 50% equity is viewed positively, the company's debt-to-proven reserve metrics are among the highest in the industry, Fitch said. Future acquisitions remain almost a certainty and, given the prices for proven reserves, Fitch predicted they will be leveraging.

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