Chesapeake Energy (CHK) is said to be discussing selling pipelines to Global Infrastructure Partners for more than $4 billion. While I think this move is a positive if Chesapeake elects to go at it alone, I think they are selling a high quality asset that will produce solid cash flows for years at a fair price. It would be far more value accretive if the company would also put itself up for sale so that the capital structure can be rectified without having to sell assets at bargain prices. This company has been run into the ground by excessive gambling and horrible capital management. By no means would I deny the company’s success in identifying attractive assets such as the Utica prior to peers, but a company can’t spend more than their operating cash flows ever year in a commodity business without compromising the capital structure when prices drop. This in addition to the insider dealing with CEO Aubrey McClendon have really broken my trust as a Chesapeake shareholder with the company. I view the board changes as game changing however, and I’m optimistic that either way the future looks brighter than the recent past.
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