Exploration

Chesapeake reports loss of $964 million for 1Q 2016

Chesapeake Energy Corporation (NYSE:CHK) in its 1Q results today reported net loss of $964 attributable to its common shareholders, or $1.44 per fully diluted share. The loss was primarily driven because of non-cash impairment of its oil and gas business worth $853 million. Adjusting for items including the impairment expense, net loss amounted to $120 million or $0.10 per share.

The lower level of commodity prices continued to take a toll on the company’s performance, as its revenues declined by 39% on Year-over-Year (YoY) basis. Its average realized price for crude oil per barrel amounted to $37.74, which was much lower than $64.04 and $65.73 on Quarter-over-Quarter (QoQ) and YoY basis respectively.

Chesapeake reports loss of $964 million for 1Q 2016

On the other hand, its daily production figures for the quarter ending March 2016 amounted to 672,400 barrels of oil equivalent per day (boe/d). After adjusting for asset sales, its production was higher than by a meager 1%.

Hence, it can be argued that the company’s performance remained fairly stable in terms of production, but lower level of crude and natural gas prices forced company to report losses in the quarter.

Another positive aspect for investors was its management’s consistent focus towards cost discipline. Its cash based expenses continued to decline for the quarter. Its average production expenses per barrel of oil equivalent for this quarter amounted to $3.36, which was about 31% lower on YoY basis.

Moreover, General and Administrative expenses per barrel of oil equivalent declined by 13% on YoY basis to $0.79. Considering lower level of cash expenses, Chesapeake has also lowered its guidance for production expenses.

As compared to same period last year, its capital investments had declined substantially, from $1.5 billion in 1QFY15 to $365 million this quarter. These figures reflect management’s continuous focus to maintain cost discipline and increase value for its shareholders.

While commenting on its financial health, Chesapeake mentioned that its debt amounted to $9.4 billion as of March 31, 2016. With asset sales lined up, Chesapeake has only $329 million of debt to be matured next year. With consideration of recent spike in crude and natural gas prices, and expectations of further stability in commodity prices, debt doesn’t appear to be a problem for the company in the short term.

Chesapeake also mentioned the reaffirmation of its borrowing base of $4 billion credit facility which is to be matured in 2019. In order to enhance its liquidity, the company has signed asset sale agreements worth $1.2 billion.

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