Chesapeake Energy reports $4.1 billion loss

Chesapeake Energy, the nation’s second-largest producer of natural gas, reported a huge second-quarter loss Wednesday, partly due to a write-down of its oil and natural gas assets.

The Oklahoma City energy giant’s $4.1 billion loss includes a $3.7 billion write-down of its assets. Its adjusted net loss, excluding charges, was $83 million, or 11 cents a share, compared with a $281 million profit in the same quarter last year. The company still had $2 billion in cash and $4 billion in available credit.

CEO Doug Lawler, who replaced embattled founder Aubrey McClendon in 2013, said that the downturn in commodity prices presents a severe test for his company but that Chesapeake remains focused on lowering costs and improving operational efficiencies.

He said the company will “test the market” and look for strategic asset sales, joint ventures and participation agreements. Lawler said any deal would be scrutinized because he doesn’t believe that the market properly recognizes the quality of Chesapeake’s assets.

“When you get in a stressed commodity price environment, it’s all about the rock. And the rock in this company is of the highest quality in most of our operating areas,” Lawler said during a conference call. “We just have great options.”

Late last month, Chesapeake announced that it would stop paying a quarterly dividend for the first time in 14 years because of low commodity prices. The company said eliminating the payout would save $240 million a year.

Lawler is proud of the company’s efforts to boost production and to “focus on delivering more for less.” During the second quarter, Chesapeake pumped an average of 703,000 barrels of oil a day, an increase of 13 percent over last year after adjusting for asset sales.

He said that the drilling program was executed within its $3.5 billion to $4 billion budget but that the company is “not going to grow production for production’s sake.” In the Eagle Ford Shale, Chesapeake operated six drilling rigs in the quarter, down from 20 a year ago.

But Lawler praised efforts to hold down expenses. It now costs about $5.2 million to drill a well in the Eagle Ford, down from $5.9 million last year.

“I came to Chesapeake two years ago because I considered it to be the biggest challenge and thus the biggest opportunity in the industry,” Lawler said. “I’m as determined and confident today as then that we will become a top-performing E&P company.”

Chesapeake, once the face of the Barnett Shale natural gas revolution, has been lowering its profile in North Texas. In 2014, it sold its namesake 20-story office tower near downtown Fort Worth, where it once had about 400 employees in the top half of the building.

Chesapeake also faces hundreds of lawsuits filed by mineral-rights owners in the Barnett claiming that the company cheated them out of millions in royalties. A state district judge in Tarrant County has scheduled the first 10 cases for trial starting next year.

This story was originally published August 5, 2015 at 5:13 PM with the headline "Chesapeake Energy reports $4.1 billion loss."