Even while Chesapeake Energy is bleeding billions of dollars, company leaders remain optimistic their plan of divesting $1 billion in assets in 2016 will keep the company afloat. The firm released its earnings reports for 2015 and the 4th quarter on Wednesday, showing a 2015 net loss available to common stockholders of $14.856 billion or $22.43 per fully diluted share.
That’s the reason for the fire sale.
The company said its 2016 capital expenditures will range from $1.3 billion to $1.8 billion which is nearly 57 percent less than the 2015 levels.
Chesapeake reported it sold narly $700 in assets last year and is planning to make another $500 million to $1 billion in asset divestitures in 2016.
“In light of the challenging commodity price environment, our focus for 2016 is to improve our liquidity, further reduce our cost structure and address our near-term debt maturities to strengthen our balance sheet,” said Doug Lawler, Chesapeake’s Chief Executive Officer. “We have to set our initial capital program for the year at $1.3 to $1.8 billion, including capitalized interest, and will remain flexible to raise or lower based on commodity prices.”
He said the company’s 2016 capital program will be focused on shorter cash cycle projects that generate positive rates of return in today’s commodity price environment and in mitigation of the company’s commitment obligations. The program will also be dedicated to more completions and less drilling with total completion spending representing approximately 70 percent of the company’s total drilling and completion program.
Lawler said the company plans to place 330 to 370 wells on production, resulting in total production that declines nearly zero percent to 5 percent compared to 2015. The $700 million in assets sold in 2015 will also result in lower production of nearly 31,000 barrels of oil equivalent per day of production in 2016. The planned divestiture of certain of the company’s Granite Wash assets in Western Oklahoma and the Texas Panhandle requires Chesapeake to repurchase the overriding royalty interests related to three of the company’s previous volumetric production payment transactions for approximately $200 million.
In trying to improve the company’s cash flow and provide protection against lower commodity prices, Chesapeake has also hedged more than 590 million cubic feet of its projected 2016 natural gas production at nearly $2.84 per mcf and more than 19 million barrels of its projected 2016 oil production at nearly $47.79 per barrel.
Listen to Doug Lawler’s opening remains during Wednesday morning conference call on the release of the earnings.
