Chesapeake Energy Corp. is following through on its pledge to focus on drilling wells, the company said Wednesday.
“We're beginning to see the benefits of our operational strategy shift from identifying and capturing new assets to developing our extensive existing assets as we enter a new era of shareholder value realization,” acting CEO Steve Dixon said during a conference call with analysts.
The new focus has translated into change in how the Oklahoma City energy company spends its money.
Over the past three years, Chesapeake has spent just 50 percent of its capital expenditure budget on drilling and completion activities. That number is expected to increase to 80 percent in 2013 and 90 percent in 2014, Chief Financial Officer Nick Dell'Osso said.
“We are now clearly seeing the benefits of our past investments in leasehold oil field services and other assets which no longer require significant capital investment,” he said.
Shareholder groups have criticized Chesapeake over the past year for not focusing enough on drilling.
Wednesday, Chesapeake reported a first-quarter profit of $15 million, or 2 cents a share, up from a loss of $71 million, or 21 cents a share, in the first quarter of 2012. Revenues improved nearly 42 percent to $3.4 billion, up from $2.4 billion in the year-ago quarter.
The Oklahoma City energy company said its first-quarter total production grew 9 percent to 4 billion cubic feet of natural gas equivalent per day. Oil production jumped 56 percent to 103,000 barrels per day.
“Chesapeake is off to a strong start in 2013,” Dixon said.
Chesapeake also said it has sold or agreed to sell about $2 billion in assets so far this year as part of the company's previously announced goal of selling $4 billion to $7 billion by the end of 2013.
“We anticipate closing our previously announced Mississippi Lime joint venture transaction with Sinopec before the end of the second quarter and expect to sign agreements to sell our northern Eagle Ford Shale assets, the majority of our remaining midstream assets and other noncore properties during the second quarter,” Dixon said. “These transactions will allow us to fund current capital expenditures and reduce debt.”
Tulsa-based SemGroup Corp. said Wednesday it has agreed to buy pipelines and other midstream assets from Chesapeake for $300 million. The sale is comprised of assets in the Mississippi Lime formation of northern Oklahoma and western Kansas, including 200 miles of gathering pipeline and two processing plants.