Business, Government Legal News from throughout WVChesapeake reports profits up in 4Q

Chesapeake Energy Corp.'s shift toward oil production paid off in the fourth quarter with more than double profits year over year.

The Oklahoma City-based oil and gas producer reported net income of $429 million, or 63 cents per share, up from $180 million, or 28 cents, a year earlier.

Income for the full year was $1,570 million, compared with $1,663 million in 2010.

With gas oversupplied and prices continuingly low, the company is making an ongoing shift from being a 90 percent gas producer to a "much more balanced" producer in years ahead, Chief Executive Officer Aubrey McClendon said in a Feb. 22 earnings conference call.

Overall production was up 15 percent year over year, a 22^nd consecutive year increase.

But while oil and natural gas liquids represented only 18 percent of the company's realized revenues in 2010, the shift toward oil and liquids put them at 30 percent of revenues in 2011 and at 37 percent in the fourth quarter of 2011.

The company reported that it increased proved gas and oil reserves by 1.7 trillion cubic feet equivalent, or 10 percent for 2011 over 2010.

Chesapeake announced a month ago that it would cut gas production by 8 percent. Those curtailments are in force now, the company affirmed, and are located primarily in the Haynesville and Barnett shales.

It plans to reduce rigs in dry gas regions by two-thirds to just 24 by the end of the first quarter, it said, and its dry-gas drilling budget to its lowest level since 2005; at the same time, rigs drilling for oil and in wet gas regions will rise from 92 to 133 this year.

McClendon acknowledged in the Feb. 22 earnings conference call that the shift to liquids has caused the company to outspend cash flow, "causing anxiety among investors and analysts."

But, he insisted, the company expects to realize $10 to $12 billion from asset sales to fund the gap between operating cash flow and expenditures in 2012 and 2013.

By 2014, he said, the company will have balanced cash flow and capital expenditures and, in 2015, its valuation will be much higher.

Chesapeake shares, which trade on the New York Stock Exchange under the symbol CHK, closed at $24.62 before the late-afternoon Feb. 21 earnings release; shares fell to $24.49 on after-hours trading.