Chesapeake Energy (CHK) Falls on Undisclosed Liability

Natural gas giant Chesapeake Energy (NYSE: CHK) just found itself saddled with an extra $1.4 billion in liabilities.

Chesapeake Energy had heretofore failed to report the liabilities, which stem from a series of financial deals that didn’t previously make the company’s balance sheet.  That’s not good for a company that has been losing money of late due to near-record low natural gas prices. Chesapeake’s first-quarter earnings excluding items were 18 cents a share, down from 75 cents a share a year earlier.

According to The Wall Street Journal, the companies owes $300 million this year and $270 million next year. It will then owe another $800 million between 2014 and 2022.

Analysts were aware that Chesapeake was going to be saddled with liabilities, but estimates pegged those liabilities at about $600 million – less than half the actual amount.

The liabilities stem from a number of long-term commitments Chesapeake made to Wall Street banks to deliver certain amounts of natural gas and oil. The company already reported a $2.46 billion increase in its debt during last week’s earnings announcement. It also had a $71 million net loss last quarter.

So the timing for the extra liabilities isn’t great. Recognizing that, investors knocked the stock down a couple pegs in late trading today. Chesapeake fell 1.7% on Thursday, then another 0.5% after hours.

Shares of Chesapeake are now down 33% since March 20.

Published by Wyatt Investment Research at