Beleaguered Chesapeake Energy Corp. posted $940 million loss in 2012, as low natural gas prices dragged down its results throughout the year, the company reported Thursday.
Its year-end results showed improvement, however, as the company posted a $257 million profit for the final quarter of 2012, a rebound from the previous three months when low natural gas prices led to a $2 billion loss. It was helped by lower production costs, which fell 6 percent from a year ago.
Still, earnings for the nation’s second largest natural gas producer after Exxon Mobil Corp. were down 40 percent when compared with the final quarter of 2011.
Oklahoma City-based Chesapeake has struggled to rebuild a faltering revenue stream based on natural gas sales after prices for the resource fell last year to their lowest levels in a decade.
The company’s financial woes have inspired an effort to rapidly increase its oil production and reduce its reliance on low-priced natural gas.
Chesapeake’s oil production in the fourth quarter of 2012 was virtually unchanged from the three months prior, at 97,100 barrels per day. But the company did make progress during the year. The company’s fourth-quarter production of oil and other liquid hydrocarbons was up 39 percent compared with a year earlier.
Oil makes up only 15 percent of the company’s overall production, with natural gas making up 77 percent of the total.
Chesapeake’s struggles in 2012 led to disagreements among management over how to move the company forward. CEO Aubrey McClendon is set to leave the company in April after having “philosophical differences” with the new management.
Chesapeake’s board of directors insisted on an aggressive debt-funded growth strategy that left the cash-short company taking on more loans simply to stay afloat. McClendon also faced intense shareholder criticisms over allegations of conflicts of interest related to financial dealings and possible collusion. Chesapeake said Wednesday that investigations into the matters proved no wrongdoing.
In a statement Thursday, Chesapeake Chief Financial Officer Domenic Dell’Osso Jr. indicated the company would be focused on selling off assets to cut down its debt.
“We are reaffirming the commitment of management and the Board of Directors to reducing financial leverage of the company through asset sales,” he said.
Chesapeake made progress in trimming its long-term debt by 24 percent during the fourth quarter, or about $3.8 billion. The company’s long-term debt is now about $12.2 billion, still well above its total of $10.6 billion at the end of 2011.
McClendon had repeatedly stated in 2012 that he planned to sell assets to cut the company’s debt to below $9 billion by the end of the year.