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Bloomberg: Higher gas prices boost Chesapeake's first quarter

By Bob Downing Published: May 1, 2013

From Bloomberg News:

By Joe Carroll

Chesapeake Energy Corp. (CHK), the U.S. natural gas producer that replaced its chief executive officer in March amid conflict-of-interest questions, swung to a higher profit than expected as gas prices rallied on strengthening demand.

Net income was $58 million, or 2 cents a share, compared with a loss of $28 million, or 11 cents, a year earlier, the Oklahoma City-based company said in a statement today. Excluding non-cash hedging losses and severance expenses, per-share profit was 5 cents higher than the average of 28 analysts’ estimates compiled by Bloomberg.

Gas futures traded in New York jumped 39 percent during the quarter as cold weather in some of the biggest U.S. cities spurred demand for the furnace fuel. Chesapeake, which pumped enough gas last year to supply one-fifth of U.S. households, replaced CEO Aubrey McClendon on March 29 after an investor revolt and boardroom overhaul failed to resurrect a languishing stock price.

“The biggest thing they got going for them is they got rid” of McClendon, Ben Dickey, chief investment officer at BSG&L Financial Services LLC in Houston, said in an interview before the results were announced. “If gas prices continue coming back, that’ll be good for them.”

The statement was released before the start of regular U.S. equity trading. Chesapeake rose 1.1 percent to $19.54 yesterday in New York trading.

80 Percent Gas

Even as Chesapeake has emphasized the search for oil and so-called gas liquids such as propane, gas still accounted for 80 percent of the company’s 2012 output. Gas has risen 30 percent this year, touching a 20-month high of $4.43 on April 18, as a glut from North American shale formations that slashed prices to a decade-low in 2012 began to ease.

Chesapeake has outspent cash flow for most of the past two decades as it amassed prospective gas and oil fields faster than it could afford to drill wells. Chesapeake is seeking to raise as much as $7 billion this year from asset sales to cover a cash-flow shortfall and reduce debt. The company signed agreements last year to sell $12 billion in properties, short of McClendon’s original target.

McClendon, 53, was ousted as chairman in 2012 and ultimately lost the CEO’s post, too, after investors such asCarl Icahn and Southeastern Asset Management Inc.’s O. Mason Hawkins objected to management missteps and stagnating performance. A board inquiry into McClendon’s use of personal stakes in thousands of company-owned wells to obtain more than $800 million in private loans cleared him of any intentional wrongdoing in February.

McClendon was replaced at the gas explorer he co-founded almost a quarter century ago by one of his longest-serving lieutenants, Chief Operating Officer Steven Dixon. Dixon assumed the title of acting CEO while the company searches for someone to fill the role permanently, Chesapeake said in a March 29 statement.

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