Chesapeake credit rating lowered
Standard & Poor’s lowered Chesapeake Energy’s credit rating, questioning how quickly the company could remedy its financial woes.
The credit-ratings agency believes that Chesapeake will struggle to generate enough cash to pay off its debts as natural- gas prices plunge. Standard & Poor’s also noted that the “mounting turmoil” from CEO Aubrey McClendon’s personal financial dealings could make it tougher for the company to raise money in the future.
Chesapeake said it boosted the size of an unsecured term loan from Goldman Sachs Bank USA and affiliates of Jefferies Group Inc. from $3 billion to $4 billion.
Chesapeake said the $3.8 billion in net proceeds from the loan will be used to repay debt under a revolving credit facility, and for general business purposes. The company said it was increasing the loan because of strong investor demand.
S&P pushed Chesapeake further into junk investment territory by dropping its rating a notch to “BB-,” saying the company “faces major ongoing uncertainties to adverse business, financial and economic conditions.”
Chesapeake, like other petroleum companies, saw revenues sink this year as natural-gas prices tumbled to a 10-year low. It’s working to produce more profitable crude oil and liquid hydrocarbons, but the shift is costly and risky for a company with high debt.
Chesapeake gets OK for horizontal drilling
Chesapeake Energy has won permission to drill horizontally for natural gas under property owned by the Brooke County school district.
Administrators said that all safety precautions will be taken, and most residents won’t know when drilling is under way.
Superintendent Kathy Kidder-Wilkerson says Chesapeake is still in the early planning stages. But Chesapeake has agreed that it won’t situate the well pad near any school.
The superintendent says the district will get about $600,000 under the deal, and it will spend that money on grants and school improvements.
Last year, students at a Brooke middle school lost out on a $30,000 grant from Chesapeake after Wellsburg City Council banned drilling within a mile of its borders. It later rescinded the ban.