S&P affirms Chesapeake Energy

Standard & Poor's said it affirmed its BB/B-1 corporate credit rating on Chesapeake Energy Corp. following the company's announced acquisition of Columbia Natural Resources LLC from Triana Energy Holdings LLC. S&P also affirmed the company's BB senior unsecured and B preferred stock ratings.

The outlook is stable.

Chesapeake is acquiring Columbia Natural Resources for $2.2 billion in cash plus the assumption of liabilities related to Columbia's prepaid sales agreements and hedging positions (estimated at $775 million using gas prices as of Sept. 30, 2005) and an estimated $75 million working capital deficit.

While the acquisition price appears expensive relative to more recent transactions, S&P noted that Chesapeake intends to hedge at least 50% of expected Columbia production through 2008 at a time of historically high natural gas prices. Furthermore, the Appalachia gas enjoys a positive basis differential relative to NYMEX gas prices, which is generally about $0.50 per million Btu, but can range up to $4.00 in certain basins.

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