Oklahoma City’s Chesapeake Energy surprised investors this week with a second quarter earnings report showing a $227 million or $1.73 a share net loss—-a loss that prompted the company to defer completion of some wells and lower its capital guidance for the rest of the year.
Chesapeake reported adjusted net income of $1 million or a penny a share and adjusted EBITDAX of $358 million. As a result , the company stated it would lower its 2024 Capital guidance by 4 % and its Production Expense guidance by 8% “primarily due to improved operational efficiency and year-over-year deflation.
In releasing the financial report, the company stated, “Given continued weak market dynamics, the company is executing its previously disclosed plan to defer completions and new well TILs, building short-cycle, capital-efficient productive capacity, which can be activated when supply and demand imbalances correct.”
TILs are wells turned to sales. Chesapeake explained it had 29 DUCS or drilled but uncompleted wells at the end of the second quarter and 46 deferred TILs. The company it still expects to drill 95 to 115 wells for the full-year and placed 30 to 40 wells on production.
“The efforts of our team have positioned us to lower our 2024 capital and production expense guidance by $50 million and approximately 8%, respectively. Importantly, we expect these improvements will be durable through cycles, positioning us to lower our breakeven costs while we build productive capacity to more efficiently reach consumers when demand recovers,” explained Nick Dell’Osso, Chesapeake’s President and Chief Executive Officer.
“We continue to execute our business as we prudently manage current market conditions and prepare for our pending combination with Southwestern. We remain focused on operational improvements and enhancing capital efficiency.”
Chesapeake plans to pay its base dividend of $0.575 per share on September 5, 2024 to stockholders of record at the close of business on August 15, 2024. Chesapeake continues to deliver improved capital efficiency primarily driven by the positive impact of longer laterals, optimized well designs, enhanced saltwater disposal techniques and capturing market deflation. As a result, the company is lowering full-year 2024 capital guidance $50 million to $1.2 to $1.3 billion and production expense guidance $0.02 to $0.21 to $0.26 per mcf.
Inclusive of the dividend payable on September 5, 2024, Chesapeake has returned approximately $3.5 billion to shareholders since 2021 through dividends and share repurchases.
Chesapeake’s net production in the second quarter was approximately 2.75 bcfe per day (100% natural gas), utilizing an average of eight rigs to drill 30 wells and place four wells on production while building an inventory of five drilled but uncompleted (“DUCs”) wells and 24 deferred turn in lines (“TILs”). Chesapeake is currently operating seven rigs and two completion crews, having dropped an additional rig in the Marcellus earlier in July.
