Oklahoma City-based energy company Chesapeake Energy Corporation released a fourth-quarter financial statement last week that was indicative of a warmer-than-usual winter and falling natural gas prices.
A press release from the energy giant ahead of the statement showed that adjusted earnings per share dropped 14 cents between Sept. 30, 2011 and Dec. 31. The full year earnings per share ended up at $2.80, 15 cents lower than in 2010.
Natural gas, which saw prices fall by as much as $2 during Q4, made up 82 percent of the company’s total oil and gas production as of Dec. 31. According to the statement, that equates out to 2.96 billion cubic feet of natural gas being extracted per day.
Chesapeake’s proved natural gas and oil reserves rose by 10 percent, or 1.7 trillion cubic feet of natural gas equivalent (TCFE) in 2011, bringing the total reserves to 18.8 TCFE.
In a conference call with analysts last Wednesday, Chesapeake CEO Aubrey McClendon announced that the company sold $8.5 billion in assets, reaping a roughly 65 percent profit margin. “Please note,” he said, “that because of the conservatism of full cost accounting, only $437 million of those gains appeared on our income statement.”
McClendon felt confident in his company’s ability to increase production and extraction. “For 2012, we believe our liquids production will increase by more than 70 percent, or approximately 63 thousand barrels per day, compared to 2011,” he said.
Earlier this month, however, Chesapeake announced that it would be reducing the number of dry gas rigs it owns by half, from 47 to 24, and reducing production by a billion cubic feet of natural gas equivalent per day. Fellow Oklahoma-based company Devon Energy Corporation is also feeling the squeeze: their Q4 profits dropped by 10 percent even as they increased production by the same percentage.
Despite this, McClendon remained certain his company would do well in the coming year.
“Even if we were to sell 100 percent of our Permian Basin assets Chesapeake would still retain a number one or number two position in 11 of the nation’s best gas and liquids-rich plays,” he said. “Chesapeake has single-handedly generated 30 percent of all the natural gas production growth in the US during the past five years.”
The company expects to make $1.5 billion in net income in 2012 and $2.3 billion in 2013 and pull in $6.7 billion in unhedged revenue this year, while also “making 2012 the safest year in the history of the company.”
A Chesapeake-owned gas rig in Western Oklahoma suffered a blowout in January which the company is currently investigating.