Chesapeake Energy 4th quarter profit falls 36% due to debt buyback
BY BEN LEFEBVRE and TESS STYNES
OKLAHOMA CITY -- Chesapeake Energy's fourth-quarter earnings fell 36% as a surge in revenue was masked by debt-buyback expenses and other items.
The prolonged fall in natural gas prices caused Chesapeake in the fourth quarter to cut its estimate of how much oil and gas it could profitably take out of the ground by 16% year over year, to 15.7 Tcf of natural gas.
Chesapeake, the country's second-largest gas producer after Exxon Mobil, is in the midst shifting its focus to more-profitable oil production. But the shift is expensive and the company's high spending combined with low natural-gas prices helped put Chesapeake in a cash crunch it is still trying to alleviate.
Chesapeake said it sold natural gas for $2.02 a million British thermal units in the fourth quarter, a year-over-year decline of more than 20%. To combat the lower prices in 2013, the company said it expects to cut natural-gas production by roughly 7% and increase oil liquids production by 27%.
Overall, Chesapeake Energy reported a profit of $300 million, or 39 cents a share, down from $472 million, or 63 cents a share, a year earlier. Excluding debt-repurchase expenses, hedging impacts and other items, adjusted earnings fell to 26 cents from 58 cents. Revenue climbed 30% to $3.54 billion.
Analysts polled by Thomson Reuters most recently projected earnings of 14 cents a share and revenue of $2.86 billion.
Chesapeake made some headway in cutting its costs. The company said it spent $1.4 billion in drilling and leaseholdings in the fourth quarter, down from $2.4 billion the quarter before. The company also said its long-term debt fell by $3.6 billion from the third quarter, to $12 billion.
"Costs are moving in the right direction," Tudor Pickering Holt & Co. said in a client note.
Chesapeake will continue to sell assets to help make up the cash shortfall and cut its hefty debt, Chief Financial Officer Domenic J. Dell'Osso Jr. said.
Average daily production rose 9.3%, led by oil production, which grew to 15% of total production from 10%. Average realized prices for oil improved 4.8% while those for natural-gas and natural-gas liquids weakened sharply.
Shares were up 27 cents at $20.51 in premarket trading. Through Wednesday's close, the stock is up 22% this year.
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