Chesapeake Energy Corp. CEO Aubrey McClendon said Monday he was confident that the company would complete several planned property sales this year to plug a funding gap estimated at $10 billion.

“We will get our asset sales done,” he told energy analysts during an early morning conference call.

The CEO’s confidence and news of a $3 billion unsecured loan completed late Friday appeared to inspire investors, who lifted the price by 4.79% to end at $15.52 in an otherwise down market. More than 78.5 million shares traded hands, triple the average daily volume, but the trades failed to recover from heavy losses on Friday (see Daily GPI, May 14).

Chesapeake late Friday completed a $3 billion unsecured loan with Goldman Sachs Bank USA and affiliates of Jefferies Group Inc., with the net proceeds to be used to repay the revolving credit facility. The term loan is to be paid off once Chesapeake completes asset sales that already were planned this year, including the prized Permian Basin portfolio, which may be worth as much as $8 billion. Also to be monetized is a portion of the company’s Mississippian Lime properties, which likely will be completed through a joint venture.

“The Goldman and Jefferies term loan provides Chesapeake with greatly enhanced financial flexibility,” said McClendon. “We firmly believe this term loan answers the most important question about Chesapeake in the marketplace today. Will we have enough financial fire power to be able to complete our pending asset sales and to finish our transition to a more liquid-focused producer, thereby generating much higher returns on capital than we’ve been able to deliver in the past, as primarily a natural gas producer?

“We now have substantially enhanced our liquidity, and that will ensure that we can conduct our asset monetization transactions from a position of strength. We greatly appreciate the support of our financial advisers, Goldman and Jefferies and the confidence we have demonstrated in the value of our assets and our ability to achieve our asset sale objectives. We remain focused and committed on delivering the $9.5 billion to $11 billion in asset sales we have scheduled to complete during the remainder of 2012.”

The data room for the Permian properties opened last week and buyers already are lined up, said the CEO.

However, the third leg of the monetizations, a planned volumetric production payment (VPP) in the Eagle Ford Shale, has been cancelled. It was to have given Chesapeake an estimated $1 billion in proceeds and it was “a key element of our 2Q2012 financial plan.” Basically, a VPP gives the buyer a share of a leasehold’s produced oil or gas in exchange for an upfront payment. While it gives the seller upfront cash, it delays the producer’s output over a period of time, since that is directed to the buyer.

Chesapeake already has 10 VPPs in place for some of its onshore leaseholds, in which it has publicly disclosed that it has received $6.4 billion. The Wall Street Journal reported last week that Chesapeake has about $1.4 billion of unreported liabilities over the next decade associated with the VPPs, beginning with $300 million this year and in 2013.

Instead of participating in another VPP, “we’ve identified other assets that are noncore to the company that will enable us to reach…our [sales goal] for the remainder of the year,” McClendon said. “We also plan to sell sufficient noncore assets in 2013 to make sure we are well funded next year, as we complete our natural gas-to-liquids transition and reach our goal of being free-cash-flow positive in 2014.

“Believe me, Chesapeake’s management team is very, very focused on getting this funding gap issues behind us once and for all and as early as possible.We will sell sufficient assets in 2013 to make sure we are well funded next year and reach our goal to be cash flow positive and get our funding issues behind us once and for all.”

This year Chesapeake is “moving from asset capture to asset harvest,” McClendon noted. Over the past seven years the company has participated in an “asset resource revolution,” but the transition to more liquids plays, begun two years ago, “has not been easy with gas prices at 10-year lows.”

There is “no CEO more determined or motivated than I am,” he told analysts. “I understand fully where we are, where we’ve been and where we are going.”

According to Canaccord Genuity’s John Gerdes and Ryan Oatman, the Goldman/Jefferies term loan is repayable anytime this year without penalty “at par value” because it doesn’t mature until late 2017 and thus proves a positive for Chesapeake. The duo previously had forecast that Chesapeake would be fully drawn on its revolver in 3Q2012, which put liquidity as their top concern above corporate governance.

“This loan fully assuages the mounting liquidity concerns and also puts Chesapeake in a better negotiating position for its planned asset sales,” said Gerdes and Oatman. “We believe Chesapeake needs to hit the low end of its $9-11.5 billion monetization target to achieve its goal of $9.5 billion in net debt at year-end 2012. This should occur as the Permian Basin alone is worth $7 billion in our view ($75,000/boe/d-plus and $3,000/acre).”

Noting the positive jump in Chesapeake’s shares Monday, Motley Fool’s Travis Holum warned that “a ton of uncertainty” continues to surround “McClendon, as well as the company’s financial position, so any pop or drop should be taken with a grain of salt. Investors are now calling for McClendon to be fired and that may provide another pop, but an estimated $10 billion funding gap this year will keep me from buying anytime soon. Chesapeake will have to sell assets at a discount because of low natural gas and now oil prices, and I wouldn’t want to buy in until there’s some clarity surrounding the company’s financial future.”

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.