Chesapeake Energy shrinks losses in 2016

Chesapeake Energy, the second-largest gas producer in the US, has reported a sharp reduction in its losses in 2016, and reiterated its plans to step up activity this year.

Its loss per share was 84 cents for the fourth quarter of last year, down from a loss of $3.36 in the equivalent period of 2015.

The improvement came even though revenues for the period were down 24 per cent at $2.02bn.

The 2015 earnings included a $2.83bn writedown in the value of Chesapeake’s assets that was not included in 2016. Even excluding that and other one-off items, however, earnings improved, swinging from a loss per share of 19 cents to a profit per share of 7 cents for the quarter, which was above the average of analysts’ expectations.

The company grew rapidly during the shale boom to become the second-largest US gas producer behind ExxonMobil, but built up a pile of debt that led to concerns that it would be forced into bankruptcy.

Its debt rose slightly during 2016, but has been cut since the year end. The company now says it has a debt balance of about $9.1bn, down from $9.7bn at the end of 2015.

Average production for last years was 635,400 barrels of oil equivalent per day, which was roughly the same as in 2015, excluding the effect of asset sales.

Proved reserves rose by 1.7bn boe during the year, a 14 per cent increase.

Chesapeake also reiterated the plans it set out last week for increased activity this year. It ran an average of 10 rigs at a time last year, but has now stepped that up to 17, and intends to maintain that number through 2017.

It completed 365 oil and gas wells last year, and plans to increase that to 420-485 this year.

Doug Lawler, chief executive, said the company had made progress on cutting costs and reducing future commitments to use pipeline and processing facilities, and on shoring up its balance sheet. “which resulted in a much stronger foundation for Chesapeake going forward.”

Chesapeake’s charismatic founder and chief executive Aubrey McClendon was forced out in 2013, and was killed in a car crash last year.

Shares have tripled over the past 12 months to $5.92 at the close on Wednesday, but are still less than a tenth of their level at the peak in the summer of 2008.