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Chesapeake Energy Rebounds after Setbacks

Riding higher on a change in management, an asset purge and spending reduction, Chesapeake Energy Co.’s third-quarter results have swung into profit and outpaced expectations.  

Chesapeake’s Q3 2013 results show a net income of $156 million (24 cents per share), up from losses of $2.06 billion for the same period last year, while revenues rose 64% to $4.87 billion. This is a significant turnaround given that revenue a year ago was at $2.97 billion.

The company’s production is up 23%, or by 120,000 barrels per day, over the same period last year.

Related article: Iran-Pakistan Natural Gas Pipeline Stumbles on Financing

Overall production was down, largely due to the sale of assets. Though natural gas production from Chesapeake has slumped, the greater focus on oil and liquids assets in Texas’ Eagle Ford has boosted the balance sheet.

Compared with last year, Chesapeake has increased oil production to 18% of its overall production, up from 14%. Average daily production during the quarter was 3 billion cubic feet of natural gas and 178,500 barrels of liquids—two-thirds of which was oil.

During the third quarter, Chesapeake cut costs and employees and plans to continue its austerity measures through 2014.

In terms of drilling expenses, the company trimmed $350 million from its spending from the second quarter to the third, and is also looking at another $600 million in asset sales for the fourth quarter.

Related article: Is now the Time for Investors to Get Back into Commodities?

Despite the fact that Chesapeake outpaced analysts’ expectations for the third quarter, shares fell more than 6% after the company said its oil production would be lower in the fourth quarter due to weather disruptions and more asset sales. Fourth quarter output will be cut by about 9,000 barrels per day.  

Chesapeake’s turnaround is also credited to its new CEO, Doug Lawler, formerly of Anadarko Petroleum Corporation. Lawler replaced Aubrey McClendon who stepped down in January, mired in a financial scandal that had unsettled investors.

By. Joao Peixe of Oilprice.com


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