Chesapeake To Cut Spending To Lower Debt

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Chesapeake Energy, the second-largest U.S. natural gas producer, said it will curb 2011 spending after spending several years as one of the more aggressive spenders in the energy business. The announcement comes not even two weeks after Barclays said global energy companies will ratchet spending up by 11% to $490 billion this year.

Chesapeake's announcement also comes soon after investor Carl Icahn announced that he has doubled his stake in the Oklahoma-based company to 5.8% and is in talks with management about ways to create more shareholder value. One such avenue may be reducing the company's debt load, which $11.44 billion as of the end of the third quarter.

Chesapeake's (CHK) has a debt ratio of 38%, much higher than the 25% average of its peers, estimates Oppenheimer & Co. analyst Fadel Gheit, the Wall Street Journal reported. The company spent $5 billion in 2010 to acquire new properties to boost its production of oil and natural gas from shale formations.

Chesapeake also plans the sale of a stake of more than 1 million acres in a shale play, and expects to soon announce the creation of a joint venture to develop acreage in Nebraska's Niobrara shale formation, according to the Journal.