Is Chesapeake the New Enron? Or Unfairly Targeted?

Take a few days off, and the news comes fast and furious. Big, complex stories are not what blog sites like MDN are usually geared for, but we have a big, complex story to deal with: Chesapeake Energy. In case you’ve missed it in the business pages, a new “controversy” has erupted over Chesapeake’s financial situation. They carry a heavy debt load, and with the commodity price of natural gas at 10-year lows, Chesapeake CEO Aubrey McClendon is doing new deals (it seems) almost weekly in a bid to keep the money coming in to the company to fund continuing exploration and production.

Some of the Chesapeake deals are of the joint venture nature as in “give us money and you’ll get part of the profits from this set of wells in this particular shale play,” and other deals sell off company assets outright, like the announcement on Monday that Chesapeake is spinning off its Oilfield Services, Inc. division into a separate company and will float an initial public offering (IPO) hoping to raise more than $850 million in cash (see this Chesapeake press release).

The Oilfield Services IPO seemed to be the straw that broke the financial analyst camel’s back. A very intense scrutiny began. Leading industry publication NGI’s Shale Daily (an advertiser on MDN) ran a story looking at the deal. Part of that story contains an analysis that shows Chesapeake’s long-term debt load is more than Exxon Mobil’s long-term debt, and Exxon is 32 times bigger in market capitalization than Chesapeake:

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