Chesapeake Energy Corp's Ratings Afffirmed by S&P.NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 11/17/97--Standard & Poor's today affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its double-'B'-minus senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. and corporate credit ratings on Chesapeake Energy Chesapeake Energy (NYSE: CHK) is a producer of natural gas in the United States and according to their 3Q 2007 report, is the largest independent producer, third overall (including majors) and the most active driller of new wells in the US. Corp. Approximately $510 million of rated debt securities are affected. The outlook remains stable. The rating affirmation A solemn and formal declaration of the truth of a statement, such as an Affidavit or the actual or prospective testimony of a witness or a party that takes the place of an oath. An affirmation is also used when a person cannot take an oath because of religious convictions. follows Chesapeake's announcement of a definitive agreement to acquire Hugoton Energy Corp. in a $380 million stock-for-stock transaction. Chesapeake will finance the transaction with $275 million of new equity and $105 million of assumed debt. Hugoton is a small exploration and production company with 322 billion cubic feet equivalent (bcfe) and acreage holdings in four regions of the U.S. Chesapeake already has some reserves or exploration activity in all four regions. The acquired assets will improve Chesapeake's business profile by expanding the reserve base to 880 bcfe (75% gas, 65% proved developed), raising the reserve life to eight years, which is average, raising the proportion of production from the more stable mid-continent, and shifting an expected shift in capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. away from the high risk Louisiana Austin Chalk formation See See also: Chalk . While total capital spending is only expected to increase about 10%, a large proportion of it will still be budgeted for high-cost (and high potential) exploration wells in the deep, complex geological formations that Chesapeake targets. The Hugoton acquisition follows closely after Chesapeake's announcement on Oct. 23, 1997 of the $193 million, primarily equity financed, acquisition of two small Oklahoma-based oil and gas producers with combined reserves of 160 bcfe. Financial risk remains high. Debt per barrels of oil equivalent will decline to $4.75, still very high compared with peers. Funds from operation to total debt will be unchanged at 25-30%, cash interest coverage unchanged at 5 times (x)-6(x), and debt/earnings before interest, taxes, depreciation, and amortization (EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ) unchanged at 3(x)-4(x). OUTLOOK: STABLE Chesapeake is expected to implement a more conservative drilling program in Louisiana while adding longer-lived assets. Future acquisitions are expected to be financed with a balance of debt and equity, Standard & Poor's said. -- CreditWire CONTACT: Josh Gonze, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , 212/208-1678 For more information on criteria or subscriptions: http://www.ratings.standardpoor.com |
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