Chesapeake Energy Swings to Loss -- Update

By Tom Fowler 

Chesapeake Energy Corp. reported a surprise fourth-quarter loss on asset-sale effects and other one-time items that masked the oil and gas producer's production and revenue growth.

The unexpected $116 million, or 24 cent per share, loss for the quarter riled the market and sent shares lower Wednesday, because analysts polled by Thomson Reuters were expecting Chesapeake to report a per-share profit of 41 cents.

Chesapeake's one-time items included an impairment charge of $120 million related to the ending of property obligations in Texas, $37 million to end drilling rig leases and $43 million related to job cutting and restructuring costs.

Excluding asset sales write-downs and other items, adjusted fourth-quarter earnings rose to 27 cents a share from 26 cents. Revenue increased 28% to $4.54 billion.

The company has struggled to reduce its spending while boosting oil and natural gas production. Chesapeake's average daily output rose 2% during the fourth quarter, but the prices the company was paid for its oil, gas and other liquids were lower than analysts were expecting. Chesapeake's average natural gas price in the quarter was just $1.90 per thousand cubic feet, down 8% from the prior-year period and 27% less than analysts were expecting.

Analysts with Wells Fargo Securities said they expect the disappointing quarterly results to be mostly erased by the next time Chesapeake reports, thanks to recent weather-related surges in natural gas prices. Earlier this month gas topped $6 per million British Thermal Units for the first time in more than five years as an unusually long and cold winter produced record gas demand across much of the country.

Most investors are focused on the potential for more cost cutting in 2014, the bank said in a note to clients.

Chesapeake has sold off nearly $15 billion of oil and gas fields and pipelines over the last two years, generating cash to pay down its debts. Chief Executive Doug Lawler has promised more sales and has pledged to rein in spending.

The company told investors Wednesday it will raise another $1 billion this year by selling off noncore businesses, but will continue to outspend cash flow by between $100 million and $300 million. Earlier this week Chesapeake announced it would try to spin off or sell its oil-field services company, which provides drilling and pressure pumping equipment to Chesapeake and other energy companies.

For the full year 2013, Chesapeake earned $724 million in net income with revenue of $7 billion, up from a loss of $769 million in 2012.

Tess Stynes contribute to this article.

Write to Tom Fowler at [e-mail]

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