Chesapeake Highlights Energy Opportunities For PE Firms

US natural gas producer Chesapeake Energy confirmed on January 5 that it had raised US$412mn from the sale of gas assets in the Southern US to investors of Argonaut Private Equity. The sale fell slightly short of the US$475mn Chesapeake had tried to raise, but investors were nonetheless buoyed by Chesapeake's ability to get this kind of cash together amid current market conditions and the stock closed up 5% at US$18.13 on January 5. Chesapeake is seeking to raise up to US$4bn to improve its capital structure after falling US natural gas prices in Q3 and Q408 and the rapid deterioration in credit markets undermined its aggressive growth strategy. Given this, CFW believes the move is without doubt a positive one, and will assist Chesapeake in its attempt to shore up over its balance sheet over the next two years. More significantly, the move highlights the possibilities for private equity firms and gas majors in energy firms whose stock is trading at rock-bottom prices.

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