Chesapeake Issues More Preferred Shares - Analyst Blog

Chesapeake Energy Corporation (CHK) issued $900 million in preferred stock to a group of private investors, including Asian sovereign wealth funds. This follows Chesapeake's sale of $1.7 billion worth of convertible preferred stock last month.

The decision of the investors, which include Sovereign wealth funds from China, Singapore and South Korea and two private-equity firms, is based on the natural gas price outlook that is anticipated to remain high as a result of inflation and the possibility of further reduction in drilling after the oil spill in the Gulf of Mexico. Moreover, natural gas is expected to be in demand, considering that it is friendlier to the environment compared with coal and other fossil fuels.

Chesapeake Energy, one of the largest U.S. natural gas producers, also said earlier this month that it expects to receive at least $2 billion from the sale of a stake in its Marcellus Shale properties, as part of its strategic plan in order to raise funds of about $5 billion over the next two years for reducing debt.

According to the company, the annual dividend on each preferred share is $57.50. Based on an initial conversion price of $27 per share, each share will be convertible into about 37.037 shares of Chesapeake common stock at any time.

Headquartered in Oklahoma City, Chesapeake's operations are focused on exploratory and developmental drilling and acquisitions in the Mid-Continent, Barnett Shale, Fayetteville Shale, Permian Basin, Delaware Basin, South Texas, Texas Gulf Coast, Ark-La-Tex, and Appalachian Basin regions of the United States.

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