Chesapeake Energy Corp. profits nearly doubled in the second quarter largely because of asset sales and increased oil production, the Oklahoma City energy company said Monday.
Chesapeake posted a profit of $929 million, up from $467 million in the second quarter of 2011. The gain translates into a net income of $1.29 per share, up from 68 cents a share in the year-ago period. Revenue improved to almost $3.39 billion in the quarter, up 2 percent from almost $3.2 billion one year ago.
Adjusting for one-time items — including a $584 million profit on the sale of its stake in the former Chesapeake Midstream Partners — the company posted profits of $3 million in the second quarter, down from $528 million one year ago. On a per-share basis, the adjusted net income translates into a profit of 6 cents a share, down from 76 cents in the year-ago period.
Chesapeake shares added 50 cents to $18.20 per share as of 5 p.m. in after-hours trading Monday. The stock price closed down 19 cents at $17.70 before the earnings numbers were released.
“We are taking aggressive and focused actions to increase cash flow and net asset value per share while also reducing long-term debt as we continue our ongoing transformation to a more balanced asset base between higher-margin liquids and lower-margin natural gas,” Chesapeake CEO Aubrey McClendon said in a statement Monday. “We are prudently deploying our capital as we focus on developing and harvesting the 10 core plays in which Chesapeake has built a No. 1 or No. 2 position.”
Chesapeake's daily production improved to 3.8 billion cubic feet of natural gas equivalent, up 25 percent from 3.05 billion cubic feet in the year-ago period. Production in the most recent quarter was 79 percent natural gas, 8 percent natural gas liquids and 13 percent oil.
Production increased in all three categories, but was up most significantly in oil, which is much more valuable.
Oil production improved 88 percent to 7.3 million barrels, up from almost 3.9 million barrels in the year-ago quarter. Natural gas liquids production increased to 4.5 million barrels, up 37 percent from almost 3.3 million one year ago.
Dry natural gas production increased almost 18 percent to 275 billion cubic feet, up from 234 billion cubic feet previously.
Like most of the oil and gas industry, Chesapeake's earnings were hurt by tumbling commodity prices.
The company reported realized prices of $1.88 per thousand cubic feet of natural gas, $91.58 per barrel of oil and $25.94 per barrel of natural gas liquids as compared to $5.19 for natural gas, $87.99 for oil and $38.37 for natural gas liquids one year ago.
Chesapeake completed $4.7 billion in sales in the first half of 2012 and said it expects about $7 billion in sales in the third quarter.
“In combination with further asset sales planned for the 2012 fourth quarter, we have increased our plans for asset sales this year to a range of $13.0 to $14.0 billion, which will enable us to accomplish our planned 25% long-term debt reduction to $9.5 billion by year-end 2012 in accordance with our 25/25 Plan we announced in January 2011,” McClendon said.
Tulsa money manager Jake Dollarhide said the earnings numbers are good news for Chesapeake.
“Despite the continued weakness in natural gas, Chesapeake gave Wall Street what it wanted,” said Dollarhide, CEO of Longbow Asset Management Co. in Tulsa. “The company continues to show signs of progress as far as diversification away from natural gas.”