Chesapeake Energy Q2 Profit Down 68%, Misses View; But Revenues Beat

(RTTNews) - Chesapeake Energy Corp. (CHK) on Wednesday reported a 68 percent decline in profit for the second quarter from last year, as higher revenues were more than offset by one-time expenses and an increase in operating expenses.

Adjusted earnings per share for the quarter missed analysts' expectations, while revenues beat their estimates. Looking ahead, Chesapeake increased the midpoint of its 2014 daily production rate outlook.

The company's second-quarter net income available to common stockholders was $145 million or $0.22 per share, down from $457 million or $0.66 per share in the same period last year.

Special items reduced net income for the latest quarter by about $90 million on an after-tax basis. This include a loss on the repurchase of debt securities associated with the company's April 2014 debt refinancing, partially offset by net gains on sales of fixed assets.

Adjusted net income for the quarter was $235 million or $0.36 per share, compared to $265 million or $0.51 per share in the year-ago period. On average, 29 analysts polled by Thomson Reuters expected the company to report earnings of $0.44 per share. Analysts' estimates typically exclude special items.

Total revenues for the quarter grew 10 percent to $5.15 billion from $4.68 billion in the prior-year period. Analysts had a consensus revenue estimate of $4.91 billion.

Total operating expenses for the quarter increased 29 percent from last year to $4.54 billion.

Oil equivalent production in the quarter was 63.2 mmboe, up 3 percent from 61.6 mmboe in the year-ago period. Meanwhile, average realized sales price including realized gains or losses on derivatives were $26.97 per boe in the quarter, down 9 percent from $29.73 per boe in the prior-year period.

Chesapeake's daily production in the second quarter averaged 694,650 barrels of oil equivalent or boe, up 13 percent year over year, adjusted for asset sales. Average oil production of approximately 113,400 bbls per day in the quarter increased 12 percent, adjusted for asset sales.

During the 2014 second quarter, Chesapeake received total proceeds of about $675 million from the sale of non-core assets, including $362 million of net proceeds from the sale of compression assets to Exterran Partners, L.P. (EXLP). In the second half of 2014, Chesapeake expects to receive more than $700 million in proceeds from various asset sales that have closed, or are underway.

Looking ahead, Chesapeake increased the midpoint of its expected 2014 daily production rate outlook by 10,000 boe, or 1.5 percent, to between 685,000 and 705,000 boe per day.

The company attributed the increase in the production outlook to better production trends in the first half of 2014, coupled with an increase in forecasted well connections during the second half of 2014.

Doug Lawler, CEO of Chesapeake, said, "In the 2014 second half, we plan to connect approximately 35% more wells to sales than we connected in the first half of the year. As our pace of well connections accelerates, we expect our production growth trajectory will increase accordingly and we anticipate our year-end 2014 exit rate will exceed 730,000 boe per day."

The company reiterated its full-year total capital expenditure guidance of $5.0 billion to $5.4 billion, excluding capitalized interest.

CHK is trading at $26.18, up $0.12 or 0.45 percent on a volume of 2.28 million shares.