Chesapeake reports 1Q net loss of $3.782 billion

Chesapeake Energy Corp., Oklahoma City, reported a first-quarter net loss of $3.782 billion, down from a net income of $374 million in first-quarter 2014.

Items typically excluded by securities analysts in their earnings estimates reduced first-quarter net income by $3.824 billion on an aftertax basis. The company says the primary source of the reduction was an impairment in the carrying value of the company’s oil and gas properties, largely resulting from significant decreases in the trailing 12-month average first-day-of-the-month oil and natural gas prices as of Mar. 31, compared with Dec. 31, 2014.

Adjusting for that and other items, first-quarter net income was $42 million, down from an adjusted net income of $405 million in first-quarter 2014.

Chesapeake’s drilling and completion capital expenditures during the first quarter were $1.3 billion, and capital expenditures for leasehold, geological, and geophysical costs and other property, plant, and equipment were $63 million, for a total of $1.4 billion. Total capital expenditures, including capitalized interest of $123 million, were $1.5 billion in the first quarter, compared with $1.8 billion in fourth-quarter 2014 and $1.4 billion in first-quarter 2014.

Daily production gains

The company’s production for the first quarter averaged 686,000 boe/d, a year-over-year increase of 14%, adjusted for asset sales. Average production in the first quarter comprised 121,900 b/d of oil, 2.9 bcfd of natural gas, and 75,800 b/d of NGLs, representing year-over-year increases of 17%, 12% and 19%, respectively, adjusted for asset sales.

In the Eagle Ford shale, well cost-reduction efforts continue and Chesapeake anticipates completed well costs of $5.5 million by yearend. The company has successfully drilled five wells with laterals in excess of 10,000 ft, which will heavily influence future development in the field as the company prioritizes front-loading its drill schedule with this well design. Chesapeake has successfully completed down-spacing tests in various sections of its acreage, adding 600–700 incremental locations to its undrilled inventory. The company plans to test its first Upper Eagle Ford well in the fourth quarter.

In the Mississippian Lime, Chesapeake anticipates completed well costs of $2.5 million in 2015, resulting in a 45% capital reduction in three years. The company in the Utica shale anticipates average completed well costs of $8.2 million for the year while extending laterals to 7,900 ft with 41 frac stages.

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