Chesapeake cuts debt but shares still reach 26-year low

After Oklahoma City’s Chesapeake Energy released a fourth-quarter production update in which it said it had managed to eliminate $900 million in debt, the company saw a 2.6% increase in premarket trading on Wednesday.

Still, the stock closed at 51.82 cents, the lowest level since January 1994. The level of share prices for the troubled Oklahoma City company has plunged nearly 65% in the past three months.

The fourth quarter report showed Chesapeake had borrowed $1.590 billion under its revolving credit facility compared to $1.504 billion drawn at September 30, 2019. It means the company has $1.4 billion of liquidity available as of the end of December 2019 and nearly $300 million of debt will mature this year.

Chesapeake’s average estimated equivalent production was 476,000 to 478,000 barrels of oil equivalent a day, an increase from the average daily production of 464,000 boe. The company said its average estimated oil production range was 125,000 to 126,000 barrels of oil a day and its capital expenditures to achieve the average totaled nearly $490 million.

“Our strong results in the fourth quarter have continued into early 2020 and are setting the foundation for the company to reach free cash flow this year,” said Chief Executive Doug Lawler. “We remain committed to achieving further meaningful debt reduction through asset sales, capital markets transactions and cost discipline.”

While Chesapeake eliminated $900 in debt, it also cut gathering, processing and transportation and general and administrative expenses by about $1.20 per boe or more than $335 million in 2019 compared to 2018. As of December 31, 2019, Chesapeake’s principal amount of debt outstanding was approximately $8.9 billion, compared to $9.7 billion as of September 30, 2019.

In Chesapeake’s Brazos Valley area in central Texas, total net field production reached a record of approximately 56,000 boe per day for the 2019 fourth quarter, including 40,000 bbls of oil per day. Recent highlights include two three-well Beran pads located in Burleson County, Texas, which, with longer laterals and optimized completions, have achieved average peak 24-hour initial production rates per well of 1,625 boe per day, of which approximately 1,550 barrels were oil.

Since Chesapeake closed the Brazos Valley acquisition on February 1, 2019, the company placed 81 wells on production in 2019 while utilizing four rigs and developing 655,000 feet of gross lateral footage, compared to 99 wells placed on production during 2018 by the previous operator using five rigs which developed 660,000 feet of gross lateral footage.

In the company’s South Texas Eagle Ford asset, total net production grew from the 2019 third quarter low, reaching approximately 104,000 boe per day in the 2019 fourth quarter, of which 60,000 barrels were oil.

In the Powder River Basin (PRB) in Wyoming, the company largely recovered from the production challenges experienced in the 2019 third quarter and early fourth quarter, averaging approximately 21,000 bbls of oil per day in December. Building on the successful Niobrara well announced in the 2019 third quarter, the company turned four additional Niobrara wells to sales during the 2019 fourth quarter, with outstanding results. To date, four of the five wells have averaged peak initial 24-hour production rates of over 2,000 boe per day, including approximately 1,200 bbls of oil.

Click here to read Chesapeake’s announcement.

Source: Chesapeake Energy