Chesapeake Energy Corporation (NYSE:CHK) today announced it has amended
its five-year, $4.0 billion revolving credit facility agreement maturing
in 2019 with its bank syndicate group. Key attributes include:
-
Facility moves to a $4.0 billion senior secured revolving credit
facility from a senior unsecured revolving credit facility
-
The initial borrowing base is confirmed at $4.0 billion,
consistent with current availability
-
Previous total leverage ratio financial covenant of 4.0x
trailing 12-month earnings before interest, depreciation and
amortization (EBITDA) is suspended
-
Two new financial covenants include a senior secured leverage
ratio of 3.5x through 2017 and 3.0x thereafter, and an interest
coverage ratio of 1.1x through the first quarter of 2017, increasing
incrementally to 1.25x by the end of 2017
Chesapeake’s credit facility may become unsecured when specific
conditions set forth in the credit agreement are met. During an
unsecured period, the total leverage ratio would be reinstated and the
senior secured leverage ratio and interest coverage ratio would no
longer apply. While Chesapeake’s obligations under the facility are
secured, the amendment gives Chesapeake the ability to incur up to $2.0
billion of junior lien indebtedness. As of September 30, 2015,
Chesapeake has $12.0 million in outstanding letters of credit under the
facility with the remainder of the $4.0 billion available.
Nick Dell’Osso, Chesapeake’s Chief Financial Officer, commented, “This
amendment to our existing revolving credit facility gives Chesapeake
greater flexibility and access to our liquidity. The new senior secured
leverage ratio which begins at 3.5x and new interest coverage ratio
which begins at 1.1x coverage provide us with full access to the
facility’s capacity under current market conditions. Along with
opportunities for additional proceeds from potential asset divestitures,
joint ventures and farm-out agreements, and an estimated reduction in
our 2016 cost structure of more than $200 million through production and
G&A cost improvements, this amendment places Chesapeake in a position of
greater strength and flexibility.”
Chesapeake Energy Corporation (NYSE:CHK) is the second-largest
producer of natural gas and the 12th largest producer of oil and natural
gas liquids in the U.S. Headquartered in Oklahoma City, the company's
operations are focused on discovering and developing its large and
geographically diverse resource base of unconventional oil and natural
gas assets onshore in the U.S. The company also owns substantial
marketing and compression businesses. Further information is available
at www.chk.com
where Chesapeake routinely posts announcements, updates, events,
investor information, presentations and news releases.
This news release includes "forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. Forward-looking statements are
statements other than statements of historical fact. They include
statements that give our current expectations or forecasts of future
events, including expected gains in financial flexibility, access to the
credit facility’s full capacity, our ability to comply with the senior
secured leverage ratio and interest coverage ratio covenants,
anticipated assets sales and proceeds to be received therefrom,
projected cash flow and liquidity, estimated reductions in 2016 cost
structures through production and G&A cost improvements, business
strategy and other opportunities, plans and objectives for future
operations (including joint venture and participation or farm-out
agreements), and the assumptions on which such statements are based.
Although we believe the expectations and forecasts reflected in the
forward-looking statements are reasonable, we can give no assurance they
will prove to have been correct. They can be affected by inaccurate or
changed assumptions or by known or unknown risks and uncertainties.
Factors that could cause actual results to differ materially from
expected results include those described under "Risk Factors” in Item 1A
of our annual report on Form 10-K and any updates to those factors set
forth in Chesapeake's quarterly report on Form 10-Q filed on August 5,
2015, or current reports on Form 8-K (available at http://www.chk.com/investors/sec-filings).
These risk factors include the volatility of oil, natural gas and NGL
prices; write-downs of our oil and natural gas carrying values due to
declines in prices; the availability of operating cash flow and other
funds to finance reserve replacement costs; our ability to replace
reserves and sustain production; uncertainties inherent in estimating
quantities of oil, natural gas and NGL reserves and projecting future
rates of production and the amount and timing of development
expenditures; our ability to generate profits or achieve targeted
results in drilling and well operations; leasehold terms expiring before
production can be established; commodity derivative activities resulting
in lower prices realized on oil, natural gas and NGL sales; the need to
secure derivative liabilities and the inability of counterparties to
satisfy their obligations; adverse developments or losses from pending
or future litigation and regulatory proceedings, including royalty
claims; the limitations our level of indebtedness may have on our
financial flexibility; charges incurred in response to market conditions
and in connection with actions to reduce financial leverage and
complexity; drilling and operating risks and resulting liabilities;
effects of environmental protection laws and regulation on our business;
legislative and regulatory initiatives further regulating hydraulic
fracturing; our need to secure adequate supplies of water for our
drilling operations and to dispose of or recycle the water used; federal
and state tax proposals affecting our industry; potential OTC
derivatives regulation limiting our ability to hedge against commodity
price fluctuations; impacts of potential legislative and regulatory
actions addressing climate change; competition in the oil and gas
exploration and production industry; a deterioration in general
economic, business or industry conditions; negative public perceptions
of our industry; limited control over properties we do not operate;
pipeline and gathering system capacity constraints and transportation
interruptions; cyber attacks adversely impacting our operations; and
interruption in operations at our headquarters due to a catastrophic
event.
In addition, disclosures concerning the estimated contribution of
derivative contracts to our future results of operations are based upon
market information as of a specific date. These market prices are
subject to significant volatility. We caution you not to place undue
reliance on our forward-looking statements, which speak only as of the
date of this news release, and we undertake no obligation to update any
of the information provided in this release, except as required by
applicable law.
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