Chesapeake Energy Turns To Profit; But Stock Down - Update

(RTTNews) - Chesapeake Energy Corp. (CHK) said Wednesday it turned around to a third-quarter profit on better oil and gas production, while it was hurt by impairment charges in the prior year. Earnings for the quarter were in line with Wall Street estimates, while revenue surpassed expectations.

The company said it expects to drill fewer wells in the fourth quarter and as a result, cut its expense outlook for 2013. Chesapeake also raised its 2013 oil production guidance by two million barrels to a range of 40 million to 42 million barrels.

Nonetheless, investors were not overly impressed with the results, dragging Chesapeake shares down by 6 percent in afternoon trading on the New York Stock Exchange.

Chesapeake, like its peers, has been impacted by low gas prices - a sad twist given that the company was among those that heralded the energy boom in the country.

In an effort to reduce costs, CEO Doug Lawler has cut its workforce and is seeking to lower production costs, as well as asset sales.

The Oklahoma City-based company posted quarterly net income to shareholders of $156 million or $0.24 per share, compared with a net loss of $2.06 billion or $3.19 per share last year.

Results for the prior-year quarter included $3.3 billion in impairment of oil and natural gas properties.

Excluding items, adjusted earnings for the quarter were $282 million or $0.43 per share, compared with $35 million or $0.10 per share in the prior year. On average, 33 analysts polled by Thomson Reuters expected earnings of $0.43 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the third quarter surged to $4.87 billion from $2.97 billion a year ago. Sixteen analysts had a consensus revenue estimate of $3.49 billion for the quarter.

Total daily production during the quarter slipped 2 percent year-over-year to 4 Bcfe per day due to asset sales, while daily oil production rose 23 percent to 120,000 barrels.

The company's average daily production consisted of about 3 billion cubic feet (bcf) of natural gas and 178,500 barrels (bbls) of liquids.

Natural gas production fell even as the company benefited from higher prices for natural gas, the company said in a statement. Oil prices also improved year-over-year.

Chesapeake operated an average of 67 rigs in the quarter and invested about $1.2 billion in drilling and completion activities.

For the fourth quarter, Chesapeake plans to operate an average of 59 rigs and complete about 14 fewer wells compared with the sequential third quarter.

For fiscal year 2013, Chesapeake now expects drilling and well completion costs of $5.5 billion to $5.8 billion, from prior range of $5.7 billion to $6 billion.

As of September 2013, Chesapeake had completed asset sales of about $3.6 billion in 2013. During the fourth quarter, the company expects to complete additional asset sales of about $600 million.

Chesapeake is trading at $26.38, down $1.76 or 6.27%, on a volume of 15.6 million shares. In the past year, the share trended in the range of $16.23 - $29.06.