HOUSTON (Reuters) - Natural gas company Chesapeake Energy Corp (CHK.N) is on track to stay within its budget for the year, Steve Dixon, the newly appointed interim chief executive officer, said on Monday.
Dixon, seeking to reassure investors following the departure of CEO Aubrey McClendon, said on a conference call that he had “tremendous confidence” that Chesapeake’s spending would not exceed the company’s planned drilling budget of about $6 billion.
On Friday, Chesapeake announced Dixon’s appointment as interim CEO and said he was part of a three-person team to lead the second-largest U.S. producer of natural gas as it continues its search for a permanent replacement for McClendon.
Mark Hanson, an analyst at Morningstar in Chicago, said Dixon hit all the right notes in his remarks to investors.
“I like what I heard on the call today,” Hanson said. “They really seem to be turning the corner on (financial) discipline.”
McClendon’s departure was announced in late January, following a governance crisis and a liquidity crunch caused by heavy spending on oil and gas acreage and a collapse in the price of natural gas.
Investors took control of the Chesapeake board in June. Reining in spending is now a top priority for the company, which faces a gap of about $4 billion this year between its expected cash flow and capital expenditures.
To help cover that shortfall, Chesapeake has pledged to sell up to $7 billion in oil and gas properties this year. So far, it has closed or signed deals totaling $1.5 billion, Dixon said, adding that there has been good interest in some of the company’s smaller asset packages.
For example, Gastar Exploration Ltd (GST.A) said on Monday that it planned to buy some of Chesapeake’s acreage and production in central Oklahoma for $85 million.
Analysts at CapitalOne Southcoast characterized the deal as “a decent step (for Chesapeake) toward selling assets and cleaning up the portfolio.”
Chesapeake plans to focus on drilling in areas it characterizes as “core,” including the Eagle Ford in south Texas. The Oklahoma City-based company is marketing acreage in the Marcellus and Utica formations in Pennsylvania and Ohio that it considers less valuable, according to a filing with the U.S. Securities and Exchange Commission.
Chesapeake has formed a chairman’s office to lead the company, which includes Dixon, Chairman Archie Dunham and Chief Financial Officer Domenic Dell’Osso.
Dixon is a long-time employee of Chesapeake. He started in 1991, two years after McClendon co-founded the company. Dixon was promoted to the position of COO in 2006.
A Reuters investigation in April 2012 found that McClendon had arranged to personally borrow more than $1 billion from a big Chesapeake investor, EIG Global Energy Partners, and secure the loan with his interest in the wells.
That program granting McClendon stakes in the company’s wells is the subject of a formal SEC investigation.
The U.S. Department of Justice has also begun a probe into possible antitrust violations in land deals Chesapeake struck in Michigan. Those deals were first reported by Reuters.
Shares of Chesapeake were up 0.2 percent at $20.46 in midday New York Stock Exchange trading.
Reporting by Anna Driver; Editing by Lisa Von Ahn and Nick Zieminski