Chesapeake Energy 3rd-Quarter Net Falls 94% on Prices (Update1) Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Jim Polson

Nov. 2 (Bloomberg) -- Chesapeake Energy Corp., the best- performing natural-gas producer last quarter in the Standard & Poor’s 500, said third-quarter net income fell 94 percent to $192 million as the recession damped demand for the fuel.

The profit was 30 cents a share, compared with $3.3 billion, or $5.62 a share, in the third quarter of 2008, Oklahoma City-based Chesapeake said today in a statement. Profit was 70 cents a share excluding some items, 5 cents better than the average of 28 analyst estimates compiled by Bloomberg.

Chesapeake cut spending and is selling assets to conserve cash and reduce debt because of the drop in gas prices. Curtailments equivalent to 45 million cubic feet a day of gas limited production to 2.48 billion cubic feet a day, 7 percent more than a year earlier, the company said Oct. 29.

The fuel, which accounts for more than 90 percent of Chesapeake’s production, averaged $3.44 per million British thermal units on the New York Mercantile Exchange during the quarter, down 62 percent from a year earlier, as the recession crimped energy use and stockpiles rose.

An unrealized loss on quarterly adjustments to the value of contacts used to lock in prices reduced net income by $166 million. The company also had $88 million to write down assets sold to a joint venture with Global Infrastructure Partners. Unrealized hedging gains added $2.85 billion to year-earlier results.

Gas Prices

The company sold gas for an average of $6.04 per thousand cubic feet in the second quarter, 25 percent lower than a year earlier as the recession reduced demand and stockpiles rose. Gas accounted for 92 percent of production.

Sales fell 76 percent to $1.8 billion. Operating costs dropped 30 percent to $1.4 billion, equivalent to $6.19 a million cubic feet.

The company said Oct. 13 that production of gas and oil will rise as much as 6 percent this year to the equivalent of 815 to 825 billion cubic feet of gas.

Chesapeake raised $2.07 billion of cash during the quarter selling stakes in producing wells, part of its processing business, and a stake in operations in the Haynesville Shale region of Louisiana and Texas. The company was in talks to sell a stake in its holdings in the Barnett Shale, the most productive shale-gas reservoir, Chief Executive Officer Aubrey McClendon said at an Oct. 14 investor meeting.

Chesapeake fell 36 cents $24.14 on the New York Stock Exchange. The statement was issued after the end of regular trading. The stock has 24 buy recommendations from analysts, 5 holds and 1 sell.

(Chesapeake will hold a conference call tomorrow at 9 a.m. New York time, accessible on the company’s Web site at http://www.chk.com.)

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.


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