Shares of Chesapeake Energy sliding fast

Shares of Chesapeake Energy are sliding fast in early Wednesday trading: the natural gas and oil exploration and production company released its fourth quarter and full-year earnings results Wednesday morning, and while the top-line results came in above Wall Street expectations, the bottom-line figures were significantly lower. As a result of this — as well as the volatility within the broader energy market — Chesapeake also said Wednesday that it plans to slash its rig count and capital spending in 2015. Added together, the news has sent shares of Chesapeake for a more-than 11% dive.

Chesapeake Energy reported US$5.05 billion in fourth quarter revenue, up 11% over the prior-year period and a figure that beat the US$4.83 billion analyst consensus. Net income for the quarter came in at US $586 million, or 81 cents per share, an improvement over the US$159 million (or 24-cent per-share) loss in the year-ago quarter. Excluding one-time items (such as unrealized gains on commodity dividends), Chesapeake’s fourth quarter net income plummeted 79% to US$34 million, resulting in earnings of 11 cents per share — a figure that is less than half of the 24 cents per share that Wall Street was expecting.

On a full-year basis, Chesapeake recorded US$20.95 billion in revenue, up 19.7% over revenue recorded in 2013. Net income for the year came in at US$1.3 billion — up from US$474 million in 2013 — and resulted in earnings of US$1.87 per share. Excluding one-time items, Chesapeake posted US$957 million in full-year net income, a figure that resulted in earnings of US$1.49 per share.

Chesapeake’s daily production for the year averaged 706,300 barrels of oil equivalent, up 9% year over year.

In a statement Wednesday morning, Chesapeake CEO Doug Lawler praised his company’s 2014 performance as well as its potential for 2015. “Because of [the] accomplishments and the progress we have made as a company in 2014, Chesapeake is well positioned to remain strong and flexible in 2015,” he said. “We have taken and continue to take appropriate steps not only to weather the current difficult commodity price environment we face today, but to thrive in it. Chesapeake became a much stronger company in 2014, and we are looking forward to becoming even stronger in 2015.”

Among the steps Lawler is referring to is a slashed capital spending plan and a lowered rig count for 2015. Chesapeake said Wednesday that it plans to spend US$4- to US $4.5 billion in 2015, a 37% decline from the US$6.7 billion the company spent in 2015. Chesapeake also said that it plans to operate between 35 to 45 rigs in 2015, a range that represents the lowest operated rig activity level since 2004 and a 38% decrease from the approximately 64 rigs the company operated in 2014.

Following the release of the earnings results, shares of Chesapeake fell more than 4% in Wednesday’s pre-market trading session and only continued to descend from there. The stock opened down 7% and is currently down 11.5%. Year-over-year, shares of Chesapeake have lost 28% of their value.

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