Chesapeake Energy (CHK) Posts Q4 Loss of 16c/Share

(Updated - February 24, 2016 7:02 AM EST)

Chesapeake Energy (NYSE: CHK) reported Q4 EPS of ($0.16), $0.01 better than the analyst estimate of ($0.17). Revenue was $2.65 billion, with the consensus at $2.63 billion

Adjusted EBITDA was $298 million, versus the consensus at $392.3 million.

Doug Lawler, Chesapeake's Chief Executive Officer, commented, "In light of the challenging commodity price environment, our focus for 2016 is to improve our liquidity, further reduce our cost structure and address our near-term debt maturities to strengthen our balance sheet. Our tactical focus areas remain asset divestitures, of which we are pleased to have approximately $500 million in net proceeds closed or under signed sales agreements, liability management and open market purchases of our bonds. We are also renegotiating gathering, transportation and processing contracts to better align with our current development plans and market conditions, aggressively working to minimize the decline of our base production and making shorter-cycle investments with our 2016 capital program. We have set our initial capital program for the year at $1.3 to $1.8 billion, including capitalized interest, and will remain flexible to raise or lower based on commodity prices."

2016 Capital Program and Production Outlook

Chesapeake is budgeting total capital expenditures (including capitalized interest) of $1.3 to $1.8 billion for 2016. Using the midpoint of the range, this represents a 57% reduction from the company's 2015 total capital expenditures of $3.6 billion. The company's planned 2016 capital program will be focused on shorter cash cycle projects that generate positive rates of return in today's commodity price environment and in mitigation of the company's commitment obligations. As a result, Chesapeake's planned 2016 capital program will be dedicated to more completions and less drilling, with total completion spending representing approximately 70% of the company's total drilling and completion program. This program, combined with the improving quality of the company's operations, its capital efficiency and lower service costs will provide incrementally positive economics, even in today's commodity price environment.

In 2016, Chesapeake plans to place approximately 330 to 370 wells on production, resulting in total production that declines approximately 0% to 5% compared to 2015, after adjusting for asset sales. At February 23, 2016, the company had approximately $700 million in asset divestitures that had closed or that signed and are expected to close between now and the end of the 2016 second quarter. The company expects that these asset sales will result in lower production of approximately 31,000 barrels of oil equivalent (boe) per day of production in 2016. The planned divestiture of certain of the company's Granite Wash assets in Western Oklahoma and the Texas Panhandle requires Chesapeake to repurchase the overriding royalty interests related to three of the company's previous volumetric production payment transactions for approximately $200 million. As a result, the projected net impact to the company's full year 2016 production will be a reduction of approximately 25,000 boe per day.

In addition, to help improve the company's cash flow and provide protection against lower commodity prices, Chesapeake has hedged more than 590 billion cubic feet of its projected 2016 natural gas production at approximately $2.84 per mcf and more than 19 million barrels of its projected 2016 oil production at approximately $47.79 per barrel. A summary of the company's planned 2016 capital program is shown below in the "Capital Spending and Cost Overview" section, while the company's 2016 forecasted production volumes are provided in the Outlook dated February 24, 2016.

For earnings history and earnings-related data on Chesapeake Energy (CHK) click here.

You May Also Be Interested In

• Bristol-Myers Squibb (BMY) stock slips despite earnings beat
• Expro Group Holdings N.V. (XPRO) Reports In-Line Q1 EPS, provides guidance
• Union Pacific (UNP) Tops Q1 EPS by 18c