Chesapeake Energy

(CHK) - Get Report

, the largest natural gas producer in the U.S., reported an $866 million loss for the fourth quarter.

Chesapeake's net loss of $1.51 per share in the quarter was down sharply from net income of $303 million, or 33 cents per share, a year earlier. However, the results were largely in line with analyst estimates, according to a research note from TPH Energy Research.

A $1.73 billion non-cash writedown in the market value of Chesapeake's oil and gas reserves was responsible for its loss. Chesapeake generated operating cash flow of $1.02 billion in the quarter, which was down 24% year on year and 15% lower than its operating cash flow in the third quarter.

The results show that Chesapeake kept its promise to reduce its natural gas production in order to support the price of natural gas. The firm said in a press release that "voluntary production curtailments due to low wellhead natural gas prices totaled approximately 65 million cubic feet equivalent per day," or 2.7% of its daily production. However, Chesapeake's total production last quarter was 14% higher year-on-year and 2% higher than the prior quarter.

Chesapeake forecast that its production rates for 2009 will be 5% lower than 2008 production. Its 2010 production target is 13% lower than 2008 production levels.

Chesapeake Energy was an influential leader in the energy industry's recent push into new deep-bed shale gas formations like the Haynesville and Fayetteville shales in Arkansas and the Marcellus shale that stretches horizontally from West Virginia through northern Pennsylvania. The move was an exciting growth prospect for the E&P sector, but it ultimately boosted domestic supplies of natural gas.

The spike in natural gas supplies came just as the U.S. entered a severe recession. Natural gas futures prices have plunged nearly 70% since July. The near-month natural gas contract on the New York Mercantile Exchange was recently trading at $4.15 per million British thermal units.

Chesapeake largely financed its huge mineral stakes in the new shale formations with debt. The cost of servicing its debt left it strapped for cash when the price of natural gas tumbled.

TPH Energy Research said in a client note that the lack of surprises in Chesapeake's filing "is a good thing, as

the company has to rebuild investor confidence one step and press release at a time."

Shares of Chesapeake Energy were recently trading down 2.8% at $16.64 per share. Chesapeake's current price is down more than 75% since last summer.

Meanwhile, Chesapeake Energy's peers in the E&P space are mostly losing ground in Wednesday's trading session.


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was recently down 1% at $67.47 per share,

Anadarko Petroleum

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was falling nearly 2% at $35.57, and

XTO Energy


was falling 1.8% at $34.40 per share.

In the integrated energy space,


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was losing 1.4% at $40.62 per share,


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was down fractionally at $42.87 per share, and

Exxon Mobil

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was moving 1.6% higher at $72.45 per share.