Feb 25, 2016 4 min read

Chesapeake Energy stopped drilling for natural gas in the Marcellus and Utica shale plays, the company reported.

A financial report detailing plans for aggressive asset sales buoyed the company’s stock Wednesday and helped allay bankruptcy fears that haunted investors for weeks.

Chesapeake, hurt by falling oil prices, reported an annual loss of nearly $14.7 billion, but has cut jobs, trimmed spending and sold assets to save money.

This year, the company said it expects to slash spending on drilling and other projects by 57 percent from the year before. It also expects to sell assets worth between $500 million to $1 billion.

In a report released Tuesday, Chesapeake said it plans to place 20 wells into production in the northern Marcellus play this year. The company, which has been a leading producer of natural gas in Pennsylvania, said it operated an average of one rig in the northern Marcellus in the fourth quarter, but has released all operated rigs in the play.

In the Utica, where the company plans to place 45 to 55 wells into production in 2016, Chesapeake said it after operating an average of two rigs in the fourth quarter, it has released all operating rigs.

On Wednesday, FourPoint Energy said it agreed to buy some of Chesapeake’s oil and gas assets in Oklahoma and Texas for $385 million.

In late 2014, Chesapeake shed its holdings in the southern Marcellus and Utica shales, selling 413,000 acres with 1,500 wells in West Virginia and Southwestern Pennsylvania to Southwestern Energy.

“In light of the challenging commodity price environment, our focus for 2016 is to improve our liquidity, further reduce our cost structure and address our near-term debt maturities to strengthen our balance sheet,” Chesapeake CEO Doug Lawler said in a statement.

Chesapeake’s asset sales leave the company better situated to pay its debts, said Mark Hanson, equity analyst for Morningstar, a Chicago-based investment research firm. In a quarterly conference call Wednesday, Chesapeake also informed investors the company has sufficient assets to maintain its access to lines of credit, Hanson said.

“I don’t think the quarter was nearly as dire as maybe some people thought,” Hanson said. “I mean, this is a company that was trading (a few weeks ago) as if it was going into bankruptcy. It’s still something of a high-wire act. There’s only so low prices can go before this company’s in real trouble, but they did get some relief here in terms of the asset sales.”

Chesapeake reported a $2.19 billion loss in its fourth quarter and saw significant drops in revenue from what it made during the same quarter last year. But its adjusted earnings and revenue still exceeded Wall Street expectations.

Losses, adjusted for one-time gains and costs, were 16 cents per share, better than some Wall Street forecasts anticipated. An average of forecasts from 10 analysts surveyed by Zacks Investment Research estimated Chesapeake would lose 18 cents per share.

The company posted revenue of $1.27 billion from its oil and natural gas unit, surpassing Wall Street forecasts. Three analysts surveyed by Zacks expected $778 million.

This week’s stock gains represent the company’s first major positive movement since before Feb. 8, when Chesapeake stock plummeted 50 percent before partially rebounding that afternoon after the company assured investors it was not pursuing bankruptcy. Even after Wednesday’s increase, shares are still down about 86 percent in the last year.

Hanson said he believes the current management is taking effective steps to avoid bankruptcy, assuming commodity prices rise eventually.

“It seems like everything they can do, they are doing and doing so aggressively,” Hanson said.

Chesapeake stock jumped 50 cents, or 23 percent, to $2.69 Wednesday after the company released its quarterly financial report.