OKLAHOMA CITY (AP) — Chesapeake Energy, the nation’s second largest natural gas driller, reported narrowed first-quarter losses Thursday and a $470 million sale of assets that could provide the company with a little more breathing room after nearly a decade of declining prices.
Shares jumped more than 3 percent in afternoon trading, as did shares of other major players in the sector, even though natural gas futures, down more than 9 percent this year, fell again Thursday.
Chesapeake will sell about 42,000 acres of assets to energy company Newfield Exploration Co. for $470 million. The deal is expected to close in the second quarter of the year.
“This transaction contributes substantially to achieving our previously announced target of an incremental $500 million to $1 billion of asset sales by year-end,” Chesapeake CEO Doug Lawler said in a company release.
Lawler said more sales are on the way over the next six months.
The company has slashed spending, sold assets and cut jobs to account for plunging energy prices. Last month, it also ended dividend payments for its preferred stock, a maneuver that saves the company $170 million per year.
Massive layoffs throughout the energy sector have weighed heavily on states that rode an energy boom which sent oil prices close to $150 per barrel just before the recession.
That includes Oklahoma, where the name Chesapeake adorns the basketball arena of the NBA’s Oklahoma City Thunder.
The effects of falling natural gas prices, which began to tumble 8 years ago only to plunge sharply at the beginning of 2014, have rippled throughout Oklahoma.
Lawmakers are struggling to close a projected $1.3 billion hole in next year’s state budget. The state has tapped emergency funding for schools and prisons and public agencies have slashed personnel and programming in the wake of two revenue shortfalls this year.
Chesapeake on Thursday reported losses of $921 million, or $1.44 per share, in the three months that ended March 31. Earlier this week Devon Energy, another Oklahoma City company whose building towers over all others downtown, announced a first-quarter loss of $3.06 billion, or $6.44 per share.
Chesapeake earlier this year assured investors that it was not seeking bankruptcy protection and its stock is up 30 percent since falling to decade lows of $1.50 per share in February.
The ongoing sale of assets will give Chesapeake more room to maneuver, though Mark Hanson, an analyst for the investment-research firm Morningstar, said Chesapeake is “not out of the woods yet.”
Chesapeake faces tremendous pressure from long-term debt and other obligations after incredibly aggressive growth under company founder Aubrey McClendon, who left the company in 2013.
McClendon died in March after the SUV he was driving slammed in into a bridge support at 78 mph.
The fiery wreck came one day after a federal grand jury indicted him on charges of conspiring to rig bids for gas leases in Oklahoma from 2007 to 2012.