Chesapeake posts $2 billion loss, debt reduction plan - WOWK 13 Charleston, Huntington WV News, Weather, Sports

Chesapeake posts $2 billion loss, debt reduction plan

Posted: Updated:

Shortly after announcing it would try to eliminate debt with a $2 billion loan, Chesapeake posted its third quarter results, showing a loss of more than $2 billion.

The loss is the largest at Chesapeake in about three years. The company has continued to massively expand its operations despite an environment of low gas prices many operators have found inhospitable.

CEO Aubrey McClendon said he was most pleased Chesapeake has continued to improve its position in gas liquids such as a propane and ethane. Currently those materials are proving more valuable than methane, the resource drillers have conventionally gone after for energy needs.

"We are pleased to report our liquids production continues its impressive growth, led by a 96 percent year-over-year and 21 percent sequential increase in our oil production.  Three years ago when Chesapeake was producing only 33,000 bbls per day of liquids, we embarked on a strategy to transform our asset base from one focused almost exclusively on natural gas to one that would provide more balance between liquids and natural gas production and that would likely also lead to higher returns on capital.  Our current liquids production now exceeds 140,000 bbls per day, even after excluding 21,000 bbls per day recently sold in the Permian transactions.  We believe the company remains on target to reach our goal of 250,000 bbls per day of net liquids production in 2015."

Despite the focus on liquids, natural gas output increased about 25 percent in the third quarter.

McClendon was also optimistic the overall performance of the company would improve.

"Improving natural gas market fundamentals, combined with our increasing liquids production, the completion of our 2012-13 asset sales program and our long-term debt reduction to below $9.5 billion, should enable Chesapeake to continue making significant financial progress in the 2012 fourth quarter and in 2013 as well," McClendon said.

The $2 billion loan announced Nov. 1 is intended to help pay back the company's large debt load. According to its third quarter results, the company has more than $15 billion in debt and is trying to reduce that to around $9.5 billion.

The company has already made some strides to that goal earlier this year in a series of multi-billion dollar asset sales.

"The board and management believe current corporate loan market conditions offer attractive refinancing opportunities on favorable terms," said Archie W. Dunham, Chesapeake's non-executive chairman of the board. "By using the proceeds of this loan to repay more costly debt and provide excess liquidity, we will enhance our financial flexibility and ensure our ability to complete our planned asset sales efficiently."

our planned asset sales efficiently."