Chesapeake Energy Corporation has announced financial and operating results for the 2008 second quarter.
For the quarter, Chesapeake’s adjusted net income to common shareholders was $479 million and adjusted ebitda was $1.435 billion, increases of 40 percent and 23 percent, respectively, over the 2007 second quarter.
Chesapeake reported a net loss to common shareholders during the quarter of $1.649 billion, operating cash flow of $1.443 billion and negative ebitda of $1.971 billion on negative revenue of $455 million and production of 212 billion cubic feet of natural gas equivalent.
Recent extreme volatility in natural gas and oil prices has created wide swings in the MTM value of Chesapeake’s hedges. For example, from June 30, 2008 to July 25, 2008, the MTM value of the company’s hedges moved in the company’s favor by approximately $4.7 billion. Should prices on September 30, 2008 be the same as prices on July 25, 2008, substantially all of the 2008 second quarter unrealized MTM loss would be reversed and reported as a unrealized MTM gain in the 2008 third quarter. Because of such pricing volatility and in order to secure strong and predictable profit margins, Chesapeake prefers to hedge much of its exposure to natural gas and oil price swings on a rolling 24-month basis. Chesapeake’s hedging agreements have been structured so that cash margin requirements are generally not required by the 22 counterparties it uses to hedge its production.