Chesapeake Energy Expects Higher Output in 2017, 2018

U.S. natural gas producer Chesapeake Energy Corp reported a surprise adjusted profit, helped by lower expenses, and said it expects to exit the next two years at higher production rates.

 

Shares of Chesapeake, which also kept its 2017 budget nearly unchanged, rose as much as 9 percent to $5.80 on Thursday.

 

Decreased costs for oilfield services and more efficient drilling processes are helping oil producers extract more barrels of oil, without having to spend more.

 

Chesapeake said on Thursday it would exit the fourth quarter of 2017 with a 7 percent rise in total production from the end of the current quarter. Chesapeake said oil production would grow by about 10 percent over the same period.

 

Between the end of 2017 and 2018, the company expects output to climb 15 percent, with a 20 percent jump in oil production.

 

Barclays analysts said Chesapeake's forecasts suggest that the brokerage may need to raise its 2018 average oil production expectation by 25-30 percent.

 

Chesapeake - which has been trying to reduce its crippling debt load of nearly $9 billion - said it planned to sell more assets this year, including about 126,000 net acres in the Haynesville Shale field in Louisiana.

 

The company will sell the acreage in two packages, and has received bids for the first, which holds net production of about 30 million cubic feet of gas per day, Chief Financial Officer Domenic Dell'Osso said on a post-earnings call.

 

A near 60 percent drop in oil prices since mid-2014 has depleted cash balances at most oil companies, forcing them to sell assets and clamp down on spending.

 

Chesapeake added just $2 million to its 2017 budget and now expects to spend $1.82 billion-$2.62 billion.

 

The company's fourth-quarter oil output estimate of 90,000-95,000 barrels per day (bpd) beat Wall Street expectation of 88,0000 bpd.

 

However, the mid-point of total fourth-quarter production forecast of 550,000-570,000 barrels of oil equivalent per day (boe/d) came in below analysts' expectation of 569,000 boe/d.

 

Net loss attributable to the company's shareholders fell nearly 75 percent to $1.20 billion from a year earlier, when the company wrote down the value of some assets by $5.42 billion.

 

Adjusted profit was 9 cents per share. Analysts on average had expected a loss of 3 cents, according to Thomson Reuters I/B/E/S.

 

Total operating expenses slumped nearly 63 percent, compensating for a 32.6 percent fall in revenue.

 

Chesapeake's shares pared some gains to trade up 2.4 percent at $5.4. Up to Wednesday's close, the stock had gained 18 percent this year.


(Reporting by Swetha Gopinath and Vishaka George; Editing by Maju Samuel and Sriraj Kalluvila)