Chesapeake Energy Corporation (NYSE: CHK) is having an overwhelmingly strong start to thet rading session, and for good reason. The company announced an asset sale that will drive $2 billion in funding. Of course, the news excited investors, sending the stock screaming for the top. Today, we’ll talk about:
- The asset sale;
- what we’re seeing from CHK as a result; and
- what we’ll be watching for ahead.
CHK Announces Asset Sale
As mentioned above, Chesapeake Energy is having an incredibly strong start to the trading session this morning after the company announced news surrounding an asset sale. In a press release issued early this morning, the company announced that it would be selling its Utica Shale operating area in Ohio to Encino Acquisition partners. Encino, a private oil and gas company that’s headquartered in Houston, will pay $2 billion for the asset.
CHK said that the transaction is subject to customary closing conditions, including third-party consents. Nonetheless, the transaction is expected to close in the fourth quarter. Also, the company announced that the purchase price includes $100 million that is contingent on future gas prices and is subject to adjustment for certain customary items at or following closing. In a statement, Doug Lawler, President and CEO at CHK, had the following to offer:
Today’s announcement makes Chesapeake a stronger and more competitive company. By divesting our position in the Utica and using the proceeds for debt reduction, we will not only significantly improve the health of our balance sheet, but we will also accelerate progress toward our strategic goals of reducing our debt, improving our margins and reaching sustainable free cash flow neutrality.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news causes moves. In the case of Chesapeake Energy, the news proved to be overwhelmingly positive. After all, the asset sale will drive $2 billion into the company. So, it comes as no surprise that excited investors are sending the stock screaming for the top. As is almost always the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (8:54), CHK is trading at $4.97 per share after a gain of $0.57 per share or 12.95% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on CHK. In particular, we’re interested in following the news surrounding the asset sale. After all, should the sale go through, it would represent an important injection in funding for the company. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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