Chesapeake stronger despite 4th-quarter loss, CEO says

Chesapeake Energy Corp. closed out 2016 with another quarterly loss, but executives expressed optimism about lower costs, decreased debt and increased drilling activity.

“2017 is an important year for Chesapeake. It’s a year when we pivot from defense to offense.” CEO Doug Lawler said in a conference call with analysts Thursday morning. “2016 was a year of significant progress and substantial achievement for Chesapeake Energy. We’re stronger today than at any time in our history.”

The Oklahoma City-based oil and natural gas producer finished the year with $882 million in cash, up from $825 million at the end of 2015, and has cut its debt to $9.1 billion.

“We have taken off over $4 billion in leverage and preferred stock over the past 16 months,” Chief Financial Officer Nick Dell’Osso said during the conference call. “Through these transactions, we have removed or refinanced $2.7 billion of nearterm debt maturing in 2017 and 2018.”

Chesapeake has raised much of the money for debt reduction through asset sales, a process executives said will continue in 2017.

“We will continue to reduce our debt by $2 to $3 billion. We plan to focus on that sooner rather than later,” Lawler said. “We’ve stayed away from giving specific guidance other than that it’s important to the company to make our goal of debt reduction.”

Chesapeake executives earlier this month said the company’s 2017 capital expenditure likely will be in

a range of $1.9 billion to $2.5 billion, which is up from $1.7 billion in 2016.

Chesapeake operated an average of 12 rigs in the fourth quarter, down from 14 in the year-ago period, but up from an average of 10 for the full year 2016. Executives have said they expect to operate an average of 16 to 18 in 2017.

“Our production volumes are expected to return to growth in the second quarter,” Dell’Osso said.

Chesapeake recorded a loss of $741 million, or 84 cents a share, in the fourth quarter, compared to a loss of $2.23 billion, or $3.36 a share, in the fourth quarter of 2015. Revenues dropped to $2.02 billion, down from $2.65 billion in the year-ago quarter.

Adjusted for onetime items, Chesapeake recorded a profit of $93 million, or 7 cents a share, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $385 million.

Chesapeake produced 53 million barrels of oil equivalent in the quarter, down from 61 million in the fourth quarter of 2015. The company received an average price of $47.95 per barrel of oil and $2.59 per thousand feet of natural gas, up from $38.33 for oil and $1.99 for natural gas in the year-ago quarter.

For the full year, Chesapeake recorded a loss of $4.88 billion, or $6.39 a share, compared to a loss of $14.9 billion, or $22.43 a share in 2015. Revenues dropped 38 percent to $7.87 billion, down from $12.8 billion one year ago.

Chesapeake shares slipped 17 cents, or 2.9 percent, Thursday to close at $5.75 on the New York Stock Exchange.