Chesapeake Energy reports net loss of $4.15 billion for Q2

Despite loss, Chesapeake Energy looking to expand in 2016

Chesapeake Energy Corp reported a quarterly loss, compared with a year-earlier profit, as it took a $5-billion charge on some oil and gas assets.

Chesapeake Energy CEO Doug Lawler.

The U.S. natural gas producer reported a net loss of $4.15-billion, or $6.27 per share, attributable to shareholders for the second quarter ended June 30. The primary source of this reduction was an impairment in the carrying value of Chesapeake’s oil and natural gas properties, largely resulting from significant decreases in the trailing 12-month average first-day-of-the-month oil and natural gas prices as of June 30, 2015, compared to March 31, 2015,  the company said in a press release.

 “The downturn in commodity prices has presented a severe test to our industry,” said CEO Doug Lawler. “Despite the challenges, we remain focused on lowering costs and improving operational efficiencies in our portfolio of high-quality assets.”

Oklahoma City-based Chesapeake Energy had a profit of $145-million, or 22 cents per share, a year earlier. Total revenue fell 41 per cent to $3.03-billion.

Lawler says production for the quarter was very strong, growing by 13 per cent over last year and two per cent sequentially when adjusting for asset sales, primarily driven by base optimization and increased well productivity from larger completions.

Photo: Shaun T. Polczer.

“We are currently expecting a stronger production trajectory as we enter 2016 and, as a result, we have raised our 2015 production guidance by four per cent,” he said.

Chesapeake Energy expects its 2015 exit rate to be approximately 660,000 barrels of oil equivalent per day, despite a voluntary curtailment of 50,000 net boe per day and the sharply reduced 2015 drilling activity.

“Our 2015 second quarter drilling and completion capital program was executed as planned, and we expect to stay within our annual capex guidance of $3.5 – $4.0 billion,” said Lawler. While we strive to remain flexible in the face of lower commodity prices, we continue to focus on driving our costs lower. We have reduced our guidance for production and general and administrative expenses due to the outstanding job our employees have done in managing our controllable costs.”

Lawler says management is not finished with the transformation of Chesapeake Energy into a “top-tier E&P company.”

“The improvements in our capital efficiency over the last two years have served to increase the unrecognized value of our assets,” he said.

“Further, I believe the strength and optionality of our portfolio provides meaningful opportunities to increase our liquidity and future cash flow.”

Chesapeake Energy is reviewing opportunities in multiple operating areas to create additional value through strategic asset sales, joint venture agreements and participation, or farmout agreements. Options for potential transaction proceeds include additional drilling in 2016 and enhancing the company’s capital structure.