Chesapeake beats on profit as combined costs fall

By John Benny (Reuters) - Chesapeake Energy Corp's quarterly profit exceeded analysts' estimates on Wednesday, as it produced more oil and natural gas at higher prices while continuing to lower costs, pulling shares in the company around 3 percent higher. Chesapeake's production rose nearly 5 percent to 554,000 barrels of oil equivalent per day (boepd), while its number of gross wells supplying to the market dropped 25 percent. The Oklahoma-based company's average realized oil price rose 10 percent to $56.89 per barrel in the quarter, while its natural gas price rose nearly 16 percent. That was in line with the trend among U.S. producers this quarter, who have all benefited from a roughly one-third rise in prices of U.S. light crude compared to a year ago. But the company also said a 4 percent fall in how much it pays to gather, process and transport its oil and natural gas had led to a reduction in overall costs per barrel on a combined basis. "Our margin improvement, while aided by increases in commodity indices, was primarily driven by strong oil production and a lower cost structure," Chesapeake Chief Executive Officer Doug Lawler said in a statement. Chesapeake has been facing pressure from investors to increase production on minimal spending, and has cut costs and jobs to manage a balance sheet saddled with nearly $10 billion in debt. In Wednesday's statement, the company also reaffirmed its 2018 spending target. Excluding items, Chesapeake earned 34 cents per share, beating analysts' average estimate of 27 cents per share, according to Thomson Reuters I/B/E/S. Net income available to shareholders rose to $268 million, or 29 cents per share, in the first quarter ended March 31, from $75 million, or 8 cents per share, a year earlier. Shares of the company were up 3.4 percent at $3.08 in premarket. (Reporting by John Benny in Bengaluru; Editing by Amrutha Gayathri and Patrick Graham)