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Chesapeake Energy Corporation Enhances Financial Flexibility With $3.0 Billion Unsecured Loan To Be Repaid From 2012 Asset Sales

Chesapeake Energy Corporation (NYSE:CHK) today announced it has entered into a $3.0 billion unsecured loan from Goldman Sachs Bank USA and affiliates of Jefferies Group, Inc. The net proceeds of the loan, after payment of customary fees and original issue discount (if any), will be utilized to repay borrowings under the company’s existing corporate revolving credit facility.

The new facility, which ranks pari passu to Chesapeake’s outstanding senior notes, matures on December 2, 2017 and may be repaid at any time this year without penalty at par value and carries an initial variable annual interest rate through December 31, 2012 of LIBOR plus 7.0%, which is currently 8.5%, given the 1.5% LIBOR floor in the loan agreement. During the remainder of the year, Chesapeake plans to complete asset sales totaling $9.0-$11.5 billion and intends to use a portion of the proceeds from these asset sales to repay the loan. Chesapeake has received strong interest from prospective buyers of its Permian Basin asset sales process and its Mississippi Lime joint venture process, and the company expects to complete these two transactions in the 2012 third quarter.

Management Comments

Aubrey K. McClendon, Chairman and Chief Executive Officer, said, “This short-term loan from Goldman and Jefferies provides us with significant additional financial flexibility as we execute our asset sales during the remainder of 2012.

As previously announced, Chesapeake’s business strategy is evolving in 2012 from the unconventional resource play identification and leasehold capture strategy of the past seven years to a strategy now focused exclusively on developing the 10 core plays in which we have built a #1 or #2 position and on continuing our transition from natural gas to liquids, reducing capital expenditures and paying down long-term debt. We believe Chesapeake has built the nation’s best collection of E&P assets, and we are 100% committed to delivering on the very substantial growth and value embedded in these assets for our shareholders through a relentless focus on developing our 10 core plays.”

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