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(Reuters) - Chesapeake Energy Corp (CHK.N) reported quarterly profit that exceeded Wall Street expectations on Wednesday, as the U.S. oil and gas company produced more crude oil from shale basins like the Eagle Ford in Texas and expenses fell.
Chesapeake, under the direction of a board handpicked by its largest investors and interim Chief Executive Steve Dixon, is focused on drilling its best properties and increasing output of more profitable crude oil while lowering spending.
The shift came after Chesapeake, led by former CEO Aubrey McClendon, had spent heavily to amass large acreage positions in U.S. shale basins. That strategy left the company saddled with huge debt and caused financial stress when natural gas prices began to collapse in 2008.
Chesapeake said its plans to curb spending and sell up to $7 billion in assets to raise cash are on target. It has long-term debt of $13.4 billion and faces a $3.5 billion funding gap this year.
"We are generating more efficient production growth, stronger cash flow and better returns on capital," Dixon told analysts on a conference call.
Phil Weiss, energy company analyst at Argus in New York, said the company's oil production, which is more profitable than natural gas production, was higher than he forecast.
"In general, it looks like they are making progress," said Weiss. "They lowered their cost guidance on a couple of items so that's a good thing."
The company has signed or negotiated deals totaling $2 billion so far this year to sell assets and will at a minimum reach the low end of its target for proceeds of $4 billion to $7 billion this year, Dixon told analysts.
The Oklahoma City company, which is searching for a permanent CEO, said its average daily production grew 9 percent to 4 billion cubic feet of natural gas equivalent per day. Of that total, oil production rose 56 percent.
McClendon left the company on April 1. He was one of the first oil and gas executives to recognize the vast potential of the country's shale basins. But he stepped down as CEO after a tumultuous year in which a series of Reuters stories about questionable practices triggered civil and criminal investigations of the No. 2 U.S. natural gas producer.
First-quarter profit was $15 million, or 2 cents per share, compared with a net loss of $71 million, or 11 cents per share, in the same period a year earlier.
Excluding one-time items, Chesapeake had a per-share profit of 30 cents per share. Analysts, on average, expected a profit of 25 cents, according to Thomson Reuters I/B/E/S.
Production expenses fell 18 percent from a year earlier as the company increased the use of techniques like drilling multiple wells from a single drilling pad to increase efficiency, the company said.
Chesapeake's average natural gas prices rose to $4.46 per thousand cubic feet equivalent (mcfe) from $4.02, and crude oil prices rose to $94.85 per barrel from $92.63.
Shares of Chesapeake fell nearly 1 percent to $19.38 in morning trade on the New York Stock Exchange. The stock was up in premarket trading, but a 3 percent drop in crude oil prices sparked widespread weakness in the sector.
Reporting by Anna Driver; Editing by Gerald E. McCormick and Jeffrey Benkoe