Chesapeake Energy Cuts Rig Operations After Disappointing Earnings

By Angela Chen 

Chesapeake Energy Corp. said that it will reduce its rig operations to the lowest level since 2004 after reporting weaker-than-expected earnings Wednesday.

Chesapeake is the latest energy company to cut back in light of falling gas prices. It will reduce capital expenditures by 37% this year and will operate 35 to 45 rigs, compared with about 64 in 2014.

As for its fourth quarter, Chesapeake said higher production volume was unable to offset lower prices.

The company has struggled to recover from years of aggressive spending as the land-grab approach the company pioneered for drilling left it spending more than its wells generated in revenue. Under Chief Executive Doug Lawler, the company has been selling assets to pay down its debts.

In June, the company completed its spinoff of its oil and natural-gas business, now known as Seventy Seven Energy Inc. In December, it completed the sale of its gas business in the Marcellus and Utica shale formations in West Virginia and southwest Pennsylvania to Southwestern Energy Co. for $5.38 billion.

Earlier this month, the company accused former Chief Executive Aubrey McClendon of stealing sensitive documents to start a rival company.

In the latest quarter, average daily production rose 12% to 729,000 barrels of oil equivalent, while operating expenses fell 4.7% to $4.09 billion.

Overall, for the quarter ended in December, Chesapeake reported a profit of $639 million, or 81 cents a share, up from the year-earlier loss of $116 million, or 24 cents a share.

Excluding unrealized gains on oil and natural gas commodity derivatives, per-share earnings fell to 11 cents from 27 cents.

Revenue increased 11% to $5.05 billion, driven by 47% revenue growth in its natural gas, oil and natural gas liquid segment.

Analysts polled by Thomson Reuters had expected a per-share profit of 24 cents and revenue of $4.83 billion.

Shares are inactive in premarket trading, but have been up about 2% this year through Tuesday's close.

Write to Angela Chen at [e-mail]

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