Chesapeake Energy said a $5.4 billion writedown in the value of oil and natural gas fields wiped out third-quarter profits and more charges are coming because the company sees no sign of a rebound in energy prices.
The writedown of Chesapeake’s oil and gas fields exceeded the company’s $5 billion market value and brought the driller’s total impairments for the first nine months of 2015 to more than $15 billion. The company expects additional material writedowns and said in a public filing that the charges will continue as long as energy prices remain depressed.
“We are not forecasting a price recovery,” Chief Executive Officer Doug Lawler said during a conference call with analysts. In response, the company will slash spending on drilling next year and focus investments on fields that can turn a profit amid low crude and gas prices, he said.
Chesapeake posted a net loss of $4.7 billion, or $7.08 a share, compared with a profit of $662 million, or 26 cents, a year earlier, the Oklahoma City-based company said Wednesday. Excluding one-time items such as the writedown, the 5-cent-a-share result was 9 cents better than the average 14-cent loss of 29 analysts’ estimates compiled by Bloomberg.
Chesapeake shares (ticker: CHK) fell 15 cents, or nearly 2 percent, to $7.46.
Chesapeake is in the process of drawing up agreements to sell unidentified assets, Chief Financial Officer Domenic Dell’Osso said during the call. Those deals probably will be valued at $200 million to $300 million and be finalized by the end of the first quarter of 2016, he said.
Chesapeake, once one of the top players in the Barnett Shale, has pulled back dramatically in North Texas in recent years, and is fighting a bevy of lawsuits brought by local property owners who claim they were cheated out of royalty income.
The company has been hammered by the glut-driven drop in oil and gas prices that crippled a pivot toward more crude production. In the third quarter, the oil and gas resources claimed by the company fell by 14 percent based on its ability to produce them economically, according to its filing. The company said it expects another 18 percent decline in the fourth quarter.