Chesapeake Profits in 3rd Quarter with Natural Gas

NEW YORK (MarketWatch) -- Chesapeake Energy Corp., the nation's biggest natural gas company, posted a huge jump in third-quarter profit Thursday, most of it tied to derivatives gains totaling nearly $3 billion.

reported net income rose to $3.28 billion, or $5.61 a share, from $346 million, or 72 cents a share, a year ago.

The results were heavily skewed by a $2.85 billion unrealized, non-cash, after-tax, mark-to-market gain on energy and interest hedges.

Excluding one-time items, Chesapeake's adjusted third-quarter net earnings available to common shareholders rose to $486 million, or 85 cents a share, from $330 million, or 69 cents a share, in the third quarter of 2007.

Analysts polled by FactSet Research, who typically exclude one-time items, had predicted the company would earn 88 cents a share.

The Oklahoma City, Okla.-based company said revenue rose to $7.49 billion for the quarter from $2.03 billion.

Including oil production, Chesapeake boosted its overall energy output by 15% during the quarter to the equivalent of 2.32 billion cubic feet of natural gas a day compared with 2.03 billion cubic feet a year earlier.

The company said it finished the quarter with proven reserves equivalent to 12.1 trillion cubic feet of gas, up from 10.88 trillion at the start of the year.
About 92% of Chesapeake's energy output is natural gas, with crude-oil and natural gas liquids making up the remaining 8%.

During the quarter the company fetched on average $8.02 per thousand feet of gas and $75.74 per barrel of oil.

As of Oct. 30, it had open swaps hedges on 62% of its fourth-quarter gas output at $9.15 per thousand cubic feet on the New York Mercantile Exchange and 43% of its oil output at $78.09 a barrel.

Chesapeake shares fell 0.5% to $21.96 on Friday morning.
The stock is down nearly 43% over the past 12 months, compared with a 24% drop on the Amex Natural Gas Index (XNG:
amex natural gas index

The company said it finished the quarter with proven reserves equivalent to 12.1 trillion cubic feet of gas, up from 10.88 trillion at the start of the year.
About 92% of Chesapeake's energy output is natural gas, with crude-oil and natural gas liquids making up the remaining 8%.

During the quarter the company fetched on average $8.02 per thousand feet of gas and $75.74 per barrel of oil.

As of Oct. 30, it had open swaps hedges on 62% of its fourth-quarter gas output at $9.15 per thousand cubic feet on the New York Mercantile Exchange and 43% of its oil output at $78.09 a barrel.

Chesapeake shares fell 0.5% to $21.96 on Friday morning.
The stock is down nearly 43% over the past 12 months, compared with a 24% drop on
XNG 440.18, +13.30, +3.1%) over the same period.

Chesapeake came under heavy selling pressure earlier this month, hit by falling natural-gas prices, tight credit markets and an ambitious but costly capital spending program. The steep drop in share price in turn raised speculation that the company could become a takeover target, helping lift the stock from a 52-week low of $11.99 on Oct. 10.