Chesapeake Energy Q1 Loss Narrows, But Misses View; Shares Down

ChesapeakeEnergy 050112

Natural gas producer Chesapeake Energy Corp. (CHK), Tuesday said its first quarter loss narrowed from a year ago, as revenues increased on higher production and mark-to-market losses declined. Nevertheless, on an adjusted basis, profit for the quarter dropped sharply and missed analysts' expectations. Shares of Chesapeake slipped over five percent on the news in after hours trade.

Production for the quarter increased 18 percent despite voluntary natural gas production curtailments by the company during February and March. Average daily total production rose to 3.66 billion cubic feet equivalent, or bcfe, from 3.107 bcfe last year.

Unrealized losses on derivatives dropped to $167 million from $725 million last year.

First-quarter net loss available to common stockholders was $71 million or $0.11 per share, compared to a loss of $205 million or $0.32 per share in the year ago quarter.

Excluding special items, adjusted net income attributable to shareholders dropped to $94 million or $0.18 per share from $518 million or $0.75 per share last year. On average, 33 analysts polled by Thomson Reuters expected earnings of $0.29 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew to $2.42 billion from $1.61 billion last year. Seventeen analysts on a consensus estimated revenues of $2.75 billion for the quarter.

Earlier today, the company announced that it would split the roles of the chairman and CEO and appoint a new independent, non-executive chairman. Current chairman & CEO Aubrey McClendon will resign from chairman position and continue as CEO. The company also announced it would terminate the controversial Founder Well Participation Program, or FWPP, sooner than the originally intended.

The decision follows a Reuters report that McClendon, who received 2.5 percent stake in the company wells under the FWPP, used it to secure a $1.2 billion personal loan.

Following the announcement earlier today on the FWPP, Chesapeake shares had risen 6 percent, but the stock pared gains after the lower-than expected results.

Moving ahead, McClendon said, "This year's capital expenditures will be front-end loaded, and for the remainder of the year we expect a significant decrease from the first quarter's peak capital expenditure levels as we further reduce drilling activity in dry natural gas plays and reduce spending on new leasehold."

The company has revised its capital expenditure budget for drilling and completion costs to a range of $7.5 billion to 8.0 billion from $7.0 billion to 7.5 billion in 2012. For 2013, capital expenditures were revised to $6.5 billion to 7.0 billion from $7.5 billion to $8.5 billion. Chesapeake said its expects two-year total drilling capital expenditure savings to be $750 million at the midpoint.

CHK closed Tuesday's trading at $19.60, up $1.16 or 6.29%, on the NYSE. The stock, however, lost $0.96 or 4.90% in after-hours trade. Trading volume for the day was 77.6 million shares, above the three-month average volume of 19.4 million.

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