* Crude output up 56 pct
* Total output up 9 pct
* Production expense down 18 pct
By Anna Driver
May 1 Chesapeake Energy Corp reported
quarterly profit that exceeded Wall Street expectations on
Wednesday, as the U.S. oil and gas company produced more crude
oil from shale basins like the Eagle Ford in Texas and expenses
Chesapeake, under the direction of a board handpicked by its
largest investors and interim Chief Executive Steve Dixon, is
focused on drilling its best properties and increasing output of
more profitable crude oil while lowering spending.
The shift came after Chesapeake, led by former CEO Aubrey
McClendon, had spent heavily to amass large acreage positions in
U.S. shale basins. That strategy left the company saddled with
huge debt and caused financial stress when natural gas prices
began to collapse in 2008.
Chesapeake said its plans to curb spending and sell up to $7
billion in assets to raise cash are on target. It has long-term
debt of $13.4 billion and faces a $3.5 billion funding gap this
"We are generating more efficient production growth,
stronger cash flow and better returns on capital," Dixon told
analysts on a conference call.
Phil Weiss, energy company analyst at Argus in New York,
said the company's oil production, which is more profitable than
natural gas production, was higher than he forecast.
"In general, it looks like they are making progress," said
Weiss. "They lowered their cost guidance on a couple of items so
that's a good thing."
The company has signed or negotiated deals totaling $2
billion so far this year to sell assets and will at a minimum
reach the low end of its target for proceeds of $4 billion to $7
billion this year, Dixon told analysts.
The Oklahoma City company, which is searching for a
permanent CEO, said its average daily production grew 9 percent
to 4 billion cubic feet of natural gas equivalent per day. Of
that total, oil production rose 56 percent.
McClendon left the company on April 1. He was one of the
first oil and gas executives to recognize the vast potential of
the country's shale basins. But he stepped down as CEO after a
tumultuous year in which a series of Reuters stories about
questionable practices triggered civil and criminal
investigations of the No. 2 U.S. natural gas producer.
First-quarter profit was $15 million, or 2 cents per share,
compared with a net loss of $71 million, or 11 cents per share,
in the same period a year earlier.
Excluding one-time items, Chesapeake had a per-share profit
of 30 cents per share. Analysts, on average, expected a profit
of 25 cents, according to Thomson Reuters I/B/E/S.
Production expenses fell 18 percent from a year earlier as
the company increased the use of techniques like drilling
multiple wells from a single drilling pad to increase
efficiency, the company said.
Chesapeake's average natural gas prices rose to $4.46 per
thousand cubic feet equivalent (mcfe) from $4.02, and crude oil
prices rose to $94.85 per barrel from $92.63.
Shares of Chesapeake fell nearly 1 percent to $19.38 in
morning trade on the New York Stock Exchange. The stock was up
in premarket trading, but a 3 percent drop in crude oil prices
sparked widespread weakness in the sector.