Still struggling with its growing debt, Oklahoma City-based Chesapeake Energy announced Thursday it lost $964 million in the first quarter but a sale of assets apparently sparked interest among investors as shares rose during the day.
The sale was of $470 million in STACK holdings in northwest Oklahoma to Newfield Exploration, a Houston, Texas based company that is well known for its aggressive posture in Canadian, Kingfisher and Blaine Counties. The sale involved 42,000 acres of leased land held by Chesapeake where the current production, according to the announcement, was 3,800 BOE a day of oil.
“Chesapeake is delivering on all four of the focus points for 2016 that we stated in February: maximizing liquidity, optimizing our portfolio, increasing cash flow and reducing debt,” said Doug Lawler, CEO. “We are pleased to announce approximately $500 million of incremental asset sales above the $700 million we announced in late February.”
He explained the sale of the 42,000 acres in the STACK “accelerates value from a portion of our undeveloped acreage that currently generates very little cash flow, giving us the ability to enhance current liquidity.”
Lawler says the sale to Newfield contributes substantially to achieving Chesapeake’s previously announced target of another $500 million to $1 billion asset sales by the end of 2016.
“We anticipate subsequent divestitures during the second and third quarters,” added Lawler who explained that since Jan. 1, 2016, the company has reduced debt that matures or can be use to Chesapeake in 2017 by nearly $282 million.
As for the $964 million in first-quarter losses, that amounted to $1.44 per fully diluted share. The company said the primary driver of the net loss was a noncash impairment of the carrying value of Chesapeake’s oil and natural gas properties of nearly $853 million largely resulting from decreases in the trailing 12-month average first-day-of-the-month oil and natural gas prices as of March 31, 2016 compared to Dec. 31, 2015.
The first quarter revenues saw a decrease of 39 percent compared to the first quarter of 2015, thanks to a drop in commodity prices.