China Resources Beer (TG:CHK)
Historical Stock Chart

From May 2019 to May 2024

Chesapeake Energy Corp.'s (CHK) first-quarter loss widened as the natural gas producer reported impairment charges of more than $6.11 billion, mostly due to the slumping value of its natural gas and oil properties.

The company also trimmed its capital expenditure budget by $500 million, or about 8%, to $6 billion.

While demand for oil and gas has dropped amid the weakened economy, pricing has been harder to peg for natural gas, as new technologies have led to natural gas discoveries, pushing supplies up as prices tanked. Chesapeake months ago was seen as being in danger of collapse amid the slump in prices and its debt-fueled growth, but has better positioned itself as it shed assets and curtailed output.

On Monday, the company reported a loss of $5.75 billion, or $9.63 a share, compared with a year-earlier loss of $142 million, or 29 cents a share.

The latest results also included a $519-million hedging gain and $91 million in mark-to-market gains. The prior year's quarter included mark-to-market losses of $704 million. Excluding items, earnings fell to 46 cents a share from $1.09.

Revenue increased 24% to $2 billion.

Analysts polled by Thomson Reuters expected per-share earnings of 49 cents on revenue of $2.2 billion.

Chesapeake plans to sell some assets to pay down debt. The company said it's in talks with a private equity investor to sell a 50% minority interest in its Barnett Shale and Mid-Continent natural gas gathering and processing assets. The company expects proceeds of about $550 from that sale, which is slated for completion in the third quarter.

Chesapeake also is in discussions with several companies about a joint venture in Texas' Barnett Shale for proceeds of about $200 million to $300 million. That deal is expected to close by the end of 2009.

The company's service costs have fallen significantly with lower natural gas prices, Chesapeake Chief Executive Audrey McClendon said in a prepared statement.

"We are now experiencing substantial savings in service costs from our vendors and anticipate directing approximately 80% of our planned drilling capital expenditures in the remaining three quarters of 2009 to our low-cost Big 4 shale plays" - the Barnett, Haynesville, Fayetteville and Marcellus shales, McClendon said.

Average daily production rose 5.8%, as total natural gas production increased 4.2% and oil production improved 4.7%.

The average realized price for gas dropped 33%, and oil prices slumped 48%.

Chesapeake ended the quarter with reserves of 11.9 trillion cubic feet per natural gas equivalent, up 3.7%. Natural gas made up 92% of the company's total production, even with a year earlier.

Chesapeake recently fell behind rival BP PLC (BP) in production and is virtually tied with ConocoPhillips (COP). Chesapeake has said it plans to regain the top spot later this year, but the shift shows how free-spending independents have struggled, while more conservative, cash-hoarding companies are better positioned to ride out the storm.

Chesapeake shares were down 3.4% to $22.05 in after-hours trading, after closing up 9.2% in the regular session. The company's stock has lost 70% of its value from its all-time high last summer.

-By John Kell and Christine Buurma, Dow Jones Newswires; 201-938-5285; john.kell@dowjones.com