Chesapeake Energy Corp, the second biggest U.S. natural gas producer, cut its 2015 capital budget for the second time this year to cope with a slump in oil and gas prices, but raised its production forecast. The company’s shares rose 4.7 percent to $7.97 in premarket trading on Wednesday. U.S. oil and gas producers are cutting budgets, streamlining costs, including laying off employees, to curb spending as a near 60 percent drop in global oil prices since June last year saps profitability.
Chesapeake is also being hit by weak natural gas prices. The company has cut about 15 percent of its workforce and suspended dividend. The company cut its 2015 capital expenditure target to $3.4-$3.9 billion from $3.5-$4.0 billion. Chesapeake said on Wednesday it wrote down the value of some oil and gas assets by $5.42 billion, adding to the $10 billion in impairment charges it has already booked this year.
Excluding the impairment charge and other items, Chesapeake reported a loss of 5 cents per share, compared with the loss of 13 cents estimated by analysts, helped by lower costs. Drilling and completion expenses fell 41 percent in the third quarter ended Sept. 30, from the second quarter. Combined production expenses, and general and administrative expenses fell 10 percent.
Revenue fell 49 percent to $2.89 billion, below the average analyst estimate of $3.02 billion, according to Thomson Reuters I/B/E/S. The company’s production fell 8.2 percent to 61.3 million barrels of oil equivalent (boe) in the third quarter, while average realized price fell 40 percent to $15.45 per boe. Net loss attributable to Chesapeake shareholders was $4.69 billion in the third quarter, compared with a year-ago profit of $169 million.
The company raised its 2015 total production forecast to 670,000-680,000 barrels of oil equivalent per day (boepd), from 667,000-677,000 boepd. Chesapeake’s stock has lost 65 percent in the past 12 months.