Chesapeake Energy Is Bolstering Its Balance Sheet

NEW YORK (TheStreet) -- Chesapeake Energy (CHK) , the nation's second largest producer of natural gas, has been reducing its debt and selling noncore assets in an effort to strengthen its balance sheet that may draw investors to the company's stock.

Here are some of the moves Chesapeake has made during the past several months to clean up its balance sheet which became loaded with debt under co-founder and former CEO Aubrey McClendon.

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  • At the end of June, Chesapeake completed the spinoff of its oilfield-services business into a separately traded company called Seventy Seven Energy (SSE) , a move that is expected to free $1.1 billion of Chesapeake's debt
  • Chesapeake is buy backing preferred shares of its CHK Utica subsidiary for $1.26 billion, a move that will save Chesapeake $75 million a year in dividend payments.
  • In May, Chesapeake reached a deal to sell noncore assets in Oklahoma and Texas for $310 million.

At the end of the second quarter, Chesapeake's debt-to-equity ratio was 0.69, which was roughly in line with that of Anadarko Petroleum (APC) , another oil and gas producer, whose debt-to-equity ratio is 0.71.

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Shares of Chesapeake closed Wednesday at $26.33. They are down 3% for the year, compared with a 7.5% gain for the Standard & Poor's 500 Index.

Chesapeake's stock trades at 20.7 times this year's estimated earnings, compared with a forward price-to-earnings ratio of 18.5 for the S&P 500.

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