Every time Chesapeake seems to be the weakest player at the table -- lately it's because the company's funding gap seems dire with the low natural gas prices -- its CEO hatches a plan to prove that the company is really holding the best hand. And it works.
Case in point: On Monday, Chesapeake announced a plan to monetize $10 billion to $12 billion in assets. This is classic Chesapeake stuff -- announce a bold plan to recognize tons of cash across all of its assets just when the market thinks it may not be able to match its debt with expected cash flow. In the Chesapeake case, the self-valuation of assets always comes before the actual deals, too.
|More ambitious plans from Chesapeake Energy to monetize assets leads to bullish trading, but also concerns about its levered balance sheet.|
Chesapeake shares raced ahead by 7% early on Monday but two hours into trading that spike had come in, and shares were up only a little more than the energy sector gained on a bullish day of trading. Maybe it was the shorts who covered early.There are some reasons to be optimistic for fans of Chesapeake Energy. For one, even though Chesapeake has again valued its own assets before even finding a buyer for them, the company does have a good track record of completing deals, like its recent Utica joint venture with Total (TOT), where it ultimately received a value per acre (roughly $15,000) which merited the company talking up the JV even before it was completed. However, there are plenty of reasons to be skeptical about Chesapeake's latest bold stroke. Here are seven of them.
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