Chesapeake to Repay Term Loan Through Senior Notes Offering

Chesapeake Energy Corporation CHK recently announced that the aggregate principal amount of the notes, being offered, is estimated at $1.25 billion. The company has priced all the senior notes on par.

The notes offering will likely close on Sep 27, subject to customary closing conditions. Investors should know that the series of notes, with principal amount of $850 million, will likely carry an interest rate of 7%. The notes are expected to mature by 2024.  

The other series, with $400 million principal, is anticipated to carry a 7.50% interest rate. The notes will mature in 2026. The offering’s net proceeds will likely be utilized for repaying the company’s outstanding secured term loan, slated to mature in 2021. The remaining amount, if any, will be allocated for normal corporate activities.  

It is to be noted that along with the net offering proceeds, the company will use cash balances and debts under revolving credit facility for paying back the term loan.    

The notes offering to repay another borrowing reflect the company’s debt laden balance sheet. In fact, the debt-to-capitalization ratio of the company is 106.02%, significantly higher than the industry’s 45.52%.

Headquartered in Oklahoma City, OK, Chesapeake is primarily engaged in exploiting onshore unconventional oil and gas resources. The company surpassed the Zacks Consensus Estimate for earnings in all the prior four quarters, the average positive earnings surprise being 20.8%.

However, the company’s pricing chart is not impressive. Over the past year, Chesapeake has lost 0.5% against the 11.5% collective gain of the stocks belonging to the industry.

Currently, the stock carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy sector include Shell Midstream Partners LP SHLX, Petroleo Brasileiro S.A. or Petrobras PBR and Denbury Resources Inc. DNR. Shell Midstream Partners and Petrobras sport a Zacks Rank #1 (Strong Buy), while Denbury carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shell Midstream Partners has an average positive earnings surprise of 7.9% for the last four quarters.

Petrobras’ bottom line beat the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 10.4%.

Denbury beat the Zacks Consensus Estimate for earnings in each of the prior four quarters, the average positive surprise being 162.9%.

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Shell Midstream Partners, L.P. (SHLX) : Free Stock Analysis Report
 
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