Chesapeake Energy posts smaller loss; to sell some assets to Newfield

Chesapeake Energy net attributable loss to shareholders narrowed to $964 million.  Company photo.

May 5 (Reuters) – Debt-laden Chesapeake Energy Corp, the second-largest U.S. natural gas producer, said on Thursday it was selling $470 million in assets in Oklahoma to Newfield Exploration Co as part of a plan to shore up its finances through divestitures.

Chesapeake’s shares were up 12 per cent at $6.31 in premarket trading after the company reported a smaller quarterly loss and cut its production expense forecast for the year. They later traded at $5.97, up 5.7 percent.

The company, which has more than $9 billion in debt, said it would sell about 42,000 net acres in Oklahoma’s STACK field, with current production of 3,800 barrels of oil equivalent per day.

Low natural gas and oil prices have hit the heavily leveraged company, which plans to sell assets worth an additional $500 million to $1 billion this year.

“We anticipate subsequent divestitures during the second and third quarters,” Chief Executive Doug Lawler said in a statement.

Well automation reduces costs, boosts production for Permian Basin operators. Systems start at $3,000 fully installed by Production Lift Technologies of Midland, Texas.

The company on Thursday lowered its forecast for 2016 production costs to $3.40-$3.60 per barrel of oil equivalent from $3.60-$3.80 per boe.

Chesapeake said in February that it tapped legal counsel Kirkland & Ellis for advice as it seeks to strengthen its balance sheet to manage debt maturing in the next 18 to 24 months. It said it had no plans for bankruptcy as some in the market have speculated.

“We continue to look at all of our options, including the use of additional secured debt, private transactions with bondholders and other types of exchange offers and open market purchases,” said CFO Nick Dell’Osso.

The company’s net loss attributable to shareholders narrowed to $964 million in the three months ended March 31, from $3.78 billion a year earlier. The year-earlier period included one-time items of $3.8 billion. First-quarter revenue fell 39 per cent on the year to $1.9 billion as gas prices tumbled.

Excluding an $853 million impairment charge, the loss in the latest quarter was 10 cents per share, in line with analysts’ average estimate.

Revenue slumped 39 percent to $1.95 billion, widely missing analysts’ expectations of $2.55 billion.

(Reporting by Swetha Gopinath and Amrutha Gayathri in Bengaluru; Editing by Terry Wade and Dan Grebler)