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Will Chesapeake Energy Go Through with the Tellurian Deal?

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CHK stock after the announcement

Chesapeake Energy (CHK) has been moving upward since it released its 4Q17 earnings. Last week, on March 8, 2018, the media reported that Tellurian (TELL) was considering purchasing CHK’s Haynesville assets.

Following the news, CHK stock fell 2.3% but rose 4.4% the next day. There apparently could be a mixed reaction in the market concerning the deal.

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Will the Tellurian–Chesapeake Energy deal go through?

Tellurian has offered Chesapeake equity as part of the deal, which might not interest CHK. Chesapeake Energy is a debt-ridden company that’s seeking to turn the sale of its assets into a means to reduce its debt. Chesapeake’s management is pursuing multiple transactions to meet its goal of removing $2 billion–$3 billion of debt from its balance sheet.

The company noted that it closed $1.3 billion in asset sales in 2017 and signed additional asset sales of $575 million, which are expected to close by the end of 2Q18.

CHK management noted in its 4Q17 earnings conference, “Gas is extremely out of favor in the equity markets.” It went on to say, “But the recognition of the fact that there is real financial return to be created in these assets and that there are some encouraging long-term supply/demand dynamics by some participants in the market, particularly those that might be connected to world markets, is real.”

On a year-over-year basis, CHK stock has fallen 42%. The Energy Select Sector SPDR ETF (XLE) fell 5.1% year-over-year, while the broader market S&P 500 SPDR ETF (SPY) rose 17.4% in the same period.

To find out more about CHK’s 4Q17 earnings, be sure to read CHK Stock Soars High after Earnings: Will Uptrend Continue?

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