While other companies have reported quarterly dividends, Oklahoma City-based Chesapeake Energy has suspended payments on each series of its outstanding convertible preferred stock effective immediately.
Money problems have caught up with the company as Doug Lawler, Chief Executive Officer indicated in making the announcement.
“The board and management believe this decision is in the best long-term interest of all Company stakeholders. Today’s decision to suspend our preferred stock dividends will allow the company to retain approximately $170 million of additional cash per year and use these funds to purchase debt at signifcant discounts in the near term.”
Lawler said given the current commodity price environment for oil, natural gas and natural gas liquids, the company wants to redirect the cash toward debt retirement which he said provides better returns for Chesapeake.
“We currently have senior debt securities trading at significant discounts and we will continue to take advantage of that within the coming year,” added Lawler.
The announcement made it clear that suspension of the dividend does not constitute an event of default under Chesapeake’s revolving credit facility or outstanding indentures.