Chesapeake Energy posts virtually flat 2nd-quarter earnings, but tops expectations

Chesapeake’s 2nd-quarter earnings virtually flat

OKLAHOMA CITY — Chesapeake Energy Corp. reported virtually flat earnings for the second quarter on Tuesday, hurt by losses in its commodity and interest rate hedging programs.

The Oklahoma City-based natural gas producer, which has been expanding its oil interests in recent months, posted net income of $235 million, or 37 cents a share, for the three months ending June 30. That compares with a profit of $237 million, or 39 cents a share, a year earlier.

Chesapeake had revenue of $2.01 billion, up 20 percent from $1.67 billion in the year-ago period. Excluding special items, the company earned 75 cents a share. Analysts had expected earnings of 69 cents per share and revenue of $2.45 billion.

Shares in Chesapeake stood at $21.92 in after-hours trading, up 9 cents.

The company said results were held back by a $214 million loss in its natural gas, oil and interest rate hedging programs and an after-tax charge of $42 million related to the redemption of some debt.

Chesapeake said it increased production of oil and natural gas liquids by 41 percent over the second quarter of 2009. Oil and natural gas liquids now account for 10 percent of Chesapeake’s total production.

CEO Aubrey McClendon said Monday that by the end of 2015, Chesapeake expects to increase its liquids production to about 25 percent of total production and 40 percent of production revenue.

He said the company plans to reduce drilling of natural gas wells until natural gas prices rise to about $6 per 1,000 cubic feet.

Natural gas closed at $4.639 per 1,000 cubic feet on Tuesday on the New York Mercantile Exchange, down 6.2 cents.

“Chesapeake’s transition will be transformative for our company and its shareholders,” McClendon said.

Phil Weiss, a market analyst with Argus Research, said Chesapeake’s plan to move into oil seems solid but noted that “they change strategy pretty often.”

“The idea they are not going to produce from these wells unless they have to is a good strategy,” Weiss said. “I’d like to see other companies use that strategy.”