Tuesday, September 24, 2013

Chesapeake Energy: More Oil, Fewer Assets And Short Term Outlook

According to a recent report by Reuters, the second biggest natural gas producer in the United States, Chesapeake Energy (CHK), has started cutting down the royalty payment it makes to the land owners on the back of depressed natural gas prices. The energy giant is now transferring a greater share of its marketing costs to Pennsylvania's landowners. The current move is in line with the company's broader cost cutting efforts. Talisman Energy (TLM) is also mulling royalty deductions while Royal Dutch Shell (RDS.A) (RDS.B) has been reducing the royalty payments to most of its Pennsylvania wells for quite some time.

Chesapeake has been eyeing a turnaround under the leadership of its new CEO Doug Lawler through a management overhaul, asset sale, debt reduction and cost cutting measures.

Management Changes
The new chief has fired at least four high profile employees, including Steven Dixon (the same Steven Dixon who was on the search committee which got Doug Lawler), and has brought in Anadarko Petroleum's (APC) Chris Doyle and Jason Pigott. Lawler is himself a 25-year Anadarko veteran.

More Oil
Chesapeake posted better than expected results in its previous quarter in which its adjusted EBITDA increased by 77% from last year to $1.42 billion on the back of a 7% increase in production. The natural gas giant was able to top the Street's estimates due to a 44% year-over-year increase in oil production to 116,000 barrels per day. Nearly all of this increase (93.4% to be precise) was due to … Read More