Low natural gas prices forced a $2 billion writedown in the value of Chesapeake Energy's Colorado leases in the Williston and Denver-Julesburg basins, the company said Thursday.
As a result, the Oklahoma City-based firm posted a loss of $2.1 billion in the most recent quarter.
The independent producer increased its daily production of oil, gas, and liquids by 24% compared with the year-ago period.
Its daily oil production nearly doubled to 97,782 b/d between this year and last as the US' second largest gas producer changes its focus to oil and liquids.
In the third quarter, Chesapeake said it produced 3.29 Bcf/d worth of gas, a 19% year-over-year increase, with gas accounting for 79% of its overall energy production.
Chesapeake's natural gas liquids production in the third quarter was 1% or 550 b/d ahead of Q3 2011's total at 44,890 b/d.
However, Chesapeake said its NGL production was 5,075 b/d lower year on year than it could have been because the company elected in certain basins to leave the ethane in the gas stream rather than extract it.
"As a result of redirecting its drilling program from dry gas plays to liquids rich plays, Chesapeake is projecting its natural gas production to decline approximately 7% in 2013 and is projecting its liquids production to increase approximately 29%," the company said.
Stripping out the one-time $2 billion writedown and smaller losses on the value of its hedging portfolio, Chesapeake said its adjusted earnings would be $33 million in the third quarter. In Q3 2011, Chesapeake reported $879 million in profits.
Driving those losses was a 59% drop to $1.97/Mcf in the average price the firm realized for its natural gas in the most recent quarter. Chesapeake said the price it got for its crude oil increased 10% year on year to $90.79/b while the price it got for NGLs dropped 24% to average $31.33/b.
Chesapeake plans to move further and further away from dry gas. Wells targeting oil and liquids already accounted for 85% of its production spending in 2012 and Chesapeake said that number will grow to 88% in 2013.
