NEW YORK (TheStreet) -- Shares of Chesapeake Energy Corp. (CHK) slumped in late morning trading today, down 1.74% to $16.90, as the company said it expects to write-down the value of its oil and natural gas properties in the first quarter due to declining prices, according to an SEC filing.
"Based on the first-day-of the-month prices we have received over the 11 months ended February 2015, we expect to have a material write-down in the carrying value of our oil and natural gas properties in the first quarter of 2015," the company said in its form 10-K.
Further material write-downs in subsequent quarters will occur if the trailing 12-month commodity prices continue to fall as compared to the commodity prices used in prior quarters, the company added.
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In 2012, the company reported a non-cash impairment charge on its oil and natural gas properties of $3.315 billion, primarily resulting from a 10% decrease in trailing 12-month average first-day-of-the-month natural gas prices as of September 30, 2012 compared to June 30, 2012, and the impairment of certain undeveloped leasehold, primarily in the Williston and DJ Basins.
Separately, Wednesday, the Oklahoma City-based natural gas and oil exploration and production company announced plans to cut 2015 capital expenses and rig counts as part of its fourth quarter earnings announcement. What it didn't announce was a cut in its dividend, which could actually hurt the company, according to one analyst.
Chesapeake Energy reported earnings of 11 cents a share for the fourth quarter, below the Capital IQ Consensus Estimate of 24 cents a share for the quarter. Revenue grew 11.2% year over year to $5.05 billion for the quarter, above analysts' estimates of $4.48 billion.
The oil company said it is budgeting total capital expenditures of $4 billion to $4.5 billion for 2015. The company spent $6.7 billion in 2014.
CEO Dug Lawler said, "We have taken and continue to take appropriate steps not only to weather the current difficult commodity price environment we face today, but to thrive in it. Chesapeake became a much stronger company in 2014, and we are looking forward to becoming even stronger in 2015."
The average recommendation of 25 brokers' estimates on the stock is 2.6, with a 2 representing an "outperform" rating and 3 a "hold," according to Reuters. The mean price target is $21.32.
TheStreet Ratings team rates CHESAPEAKE ENERGY CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CHESAPEAKE ENERGY CORP (CHK) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself."
You can view the full analysis from the report here: CHK Ratings Report