OKLAHOMA CITY — Natural gas company Chesapeake Energy said Tuesday that it posted a first-quarter profit as production and prices for gas and oil rose.
The company also said it plans to scale back drilling for natural gas and focus more on oil to take advantage of higher prices for crude.
Chesapeake's net income was $590 million, or 92 cents per share, for the quarter ended March 31, compared with a loss of $5.75 billion, or $9.63 per share, in the year-ago period when tumbling gas prices forced it to write down the value of its gas and oil properties.
Excluding one-time gains and charges, the company had income of $524 million, or 82 cents per share, compared with $277 million, or 46 cents per share, in the year-ago period.
Revenue increased to $2.78 billion from $2 billion.
Analysts, who usually don't count one-time items, forecast earnings of 70 cents per share and revenue of $2.37 billion, according to Thomson Financial.
Chesapeake, based in Oklahoma City, is one of the nation's largest gas producers and a key developer of gas from shale, a kind of sedimentary rock found around the world. Until recently it was too expensive for most companies to recover gas from shale. New drilling techniques have made it economically feasible.
The resulting increase in supplies of gas in the U.S., coupled with weak demand during the recession, has pushed natural gas prices below the levels of two years ago. Oil prices, meanwhile, are running nearly twice as high as they were a year ago.
Chesapeake said its first-quarter daily production averaged 2.6 billion cubic feet of natural gas equivalent, up 9 percent over the 2009 first quarter. The increase came even as Chesapeake sold a 25 percent stake in one of its projects during the quarter to French oil company Total.
It also realized higher prices for its gas and oil than it did a year ago.
Chesapeake said it is working to identify more supplies of oil and natural gas liquids, which accounted for about 10 percent of the company's production in the first quarter.
The company said it will reduce its investment in shale drilling by $300 million this year and $400 million next year — 12 percent and 17 percent, respectively.
The company said it plans to increase spending on drilling for oil.
Chesapeake on Monday affirmed that it expected production growth of between 8 percent and 10 percent in 2010. It increased its expectation for 2011 to between 16 percent and 18 percent, up from 15 percent to 17 percent.
Chesapeake shares fell 46 cents, or nearly 2 percent, to close at $23.62.
Copyright © 2010 The Associated Press. All rights reserved.
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