Chesapeake Energy posts Q4 loss on heavy write-down

By Staff Writer

Feb 25, 2016 07:24 AM EST

Chesapeake Energy has posted losses over $14 billion for 2015. It suffered a net loss of $2.23 billion or $3.36 a share for the fourth quarter. The loss was heavy after the writing down value of oil and gas fields in the wake of prolonged lower oil prices. However, the loss was better than the market forecast. The company now hopes to raise $1 billion by offloading non-core assets.

The New York Stock Exchange-listed Chesapeake Energy's stock suffered from drop in oil prices. The stock fell over 60 percent in just three months owing to concerns about balance sheet. The better than expected loss brought a sigh of relief to investors and shareholders. As a result, Chesapeake Energy gained 22 percent to $2.66 on NYSE. 

The Oklahoma-based Chesapeake Energy has suffered 53 percent drop in revenues for 2015 year and it was marginally better than anticipated. Chesapeake Energy has announced a loss of $14.86 billion for 2015 and this included $14.53 billion in charges. The writing down value of its oil and natural gas assets impacted the financial performance. It wrote down $2.83 billion of oil and natural gas properties during the fourth quarter of 2015, according to Nasdaq.

The company was also managed to bring down the debt burden by $2 billion to $9.7 billion by end of 2015 from $11.8 billion as on 2014. Chesapeake Energy is planning to mobilized $1 billion in 2016 by selling non-core assets in several small deals. 

It has already closed or signed a few other deals involving $700 million in 2015. The company is engaged in drilling activity from Oklahoma to Pennsylvania.  It also forecasts five percent drop in oil and gas production this year excluding asset sales.

Chesapeake Energy posted a net loss of $2.23 billion or $3.36 a share for the fourth quarter. The total earnings for the quarter were $586 million or 81 cents a share in the previous corresponding quarter. It  is hoping to reduce capital expenditures by 57 percent to $1.3 billion or $1.8 billion in 2016, as reported by Market Watch.

Doug Lawler, Chief Executive Officer of Chesapeake Energy, is focusing on improving liquidity this year in the wake of slump in commodities market. He prefers further reduction in costs to address near-term debt maturities. "Our tactical focus areas remain asset divestitures, of which we're pleased to have about $500 million in net proceeds closed or undersigned sales agreements," said Lawler. 

StreetInsider further adds that the capital program for 2016 will focus on shorter cash cycle projects to generate positive rate of return considering the prevailing lower commodity prices. Enhancing quality in drilling operations is also part of priorities of the company. Chesapeake is planning to place 330-370 wells on production in 2016.

Chesapeake Energy is one of the largest energy companies in the US. It has written down the value of oil fields as ongoing slump in commodities market adversely impacted the energy industry. Its average realized natural gas price dropped by 34 percent in fourth quarter. Natural gas accounts for 74 percent of total production. 

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