The New Chesapeake Energy Corporation (CHK)

Targeting a more conservative balance sheet

The revamped company will also sport a more conservative balance sheet, better suited for a world of volatile commodity prices. To accomplished this, the company is selling off some prized assets in its portfolio.

In June, Chesapeake Energy Corporation (NYSE:CHK) sold 425,000 net acres in the Oklahoma Mississippi Lime play to the Chinese energy giant Sinopec Shanghai Petrochemical Co. (ADR) (NYSE:SHI) for $1.02 billion. Though the deal was criticized because of its low price per acre, it was a win-win for both companies. The transaction freed up needed capital for Chesapeake while allowing Sinopec to cost-effectively expand its shale portfolio.

In July, Chesapeake Energy Corporation (NYSE:CHK) also sold assets in the Haynesville and northern Eagle Ford shale regions to EXCO for approximately $1 billion. These moves have served to close the company’s funding gap and additional asset sales are expected later this year to pare down debt.

Lawler crystallized his strategy during the company’s second quarter conference call, ‘Our go-forward strategic priorities will consist of two fundamental tenants; the first is financial discipline and the second is profitable and efficient growth from our captured resources.’  And while they haven’t committed a timeline, management has promised to balance spending with cash flow from operations in addition to restoring the company’s investment grade credit rating.

Foolish bottom line
“New Chesapeake Energy Corporation (NYSE:CHK)” would hardly recognize its former self. If Lawler can pull off this turnaround, the company will emerge as a disciplined, less risky firm. Given the stock’s recent appreciation, that prospect is something shareholders should be excited about.

The article What Will the New Chesapeake Energy Look Like? originally appeared on Fool.com.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool has the following options: long January 2014 $30 calls on Chesapeake Energy. 

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.