Chesapeake posts quarterly profit, oil output up
By Anna Driver
(Reuters) - Chesapeake Energy Corp (CHK.N: Quote) 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. Continued...