Chesapeake Energy Corp.'s (CHK) shares jumped 7% Thursday to the highest
level in more than a year, as the energy producer reported rising oil
output and its new chief executive pledged to close a persistent gap
between its spending and cash flow by next year.
Chesapeake's profit of $580 million fell 40% from a year
earlier. But stripping out one-time effects such as asset sales and
after-tax charges, earnings per share rose to 51 cents from six cents in
2012. Oil production increased 44% from a year ago and 12% from the
previous quarter.
Shares of the Oklahoma City-based company ended at $24.95 after the stock's largest single-day gain in a year.
Doug Lawler, in his debut as Chesapeake's second-ever chief
executive, said the company would focus on reining in spending and
exploiting its most profitable assets.
Mr. Lawler, who took over from Chesapeake co-founder Aubrey
McClendon in June, praised Chesapeake for its "abundance of
opportunities and strong foundation," but said he would steer the
company away from drilling geared at preserving leases. He suggested the
company would allow some of its drilling leases to expire if they
didn't yield the highest returns.
He also announced a comprehensive review of where Chesapeake
spends its money with an eye to reducing the company's financial
complexity, without offering specifics.
Mr. McClendon, who founded Chesapeake in 1989, built the
company into a powerhouse at the vanguard of tapping natural gas from
shale-rock formations. The company routinely spent more money on
drilling and acquisitions than it brought in from operations, piling on
debt.
Chesapeake spent $6 billion more in 2012 on drilling and
completing wells than the cash generated from its operations, and to
cover its costs it raised more than $11 billion last year by selling
assets.
But rising oil production, combined with modestly higher gas
prices, have helped double cash flow from the first half of 2013
compared with last year, to $2.2 billion. That is about $900 million
less than Chesapeake's well costs over the same period.
The company still carries a heavy debt load of $13 billion, up
7.4% from the beginning of the year. Chesapeake executives said they
would seek to pay down the debt with proceeds from additional asset
sales, having struck deals to sell about $4 billion of assets so far
this year.