Chesapeake Energy Corporation (NYSE:CHK) lost $0.05 a share in 2016, but its bottom-line is giving some indications of life and it has managed to enhance its financial health. The firm is moving its focus on core E&P segment by ramping up CapEx. However, the firm is still having a large debt pile and comes with a dismal track past of cash flow generation.
The buzz
Chesapeake was largely occupied with organizing the debt in the recession. But now, the company is laying the base for a turnaround. While that’s a big positive, there lies a daunting task ahead. The company was hit severely in the slump, largely because of its weak balance sheet. It achieved some success last year by implementing costs cutting measures.
Last year, Chesapeake’s production declined 6% to 233 million boe. Meanwhile, the mean sales price also declined 28% from a year ago to $17.66 per boe. At the same time, the company’s revenues from hydrocarbons sale declined 39% to $3.29 billion. However, the company reduced its production expenses and GP&T by 27.7% and 6.7% correspondingly. This converted into yearly savings of $600 million. The firm’s adjusted EBITDA declined 43.9% to $1.34 billion. The adjusted net loss came at $0.05 per share compared to $0.24 per share in 2015.
Though yearly earnings are still in the red, the company’s bottom-line starting to indicate some marks of life. In 4Q2016, which was the greatest quarter of 2016 for the firm in terms of realized costs, Chesapeake witnessed its adjusted EBITDA increased 29.3% from a year ago to $385 million, while the net profit was $0.07 a share compared to loss of $0.19 a share in 4Q2015. Remember, it’s the second net profit for the company in a row, which probably could be the sign of an improvement.
More importantly, the company has improved its financial health by removing all considerable short-term maturities.
