Writedown drives $2bn loss for Chesapeake Chesapeake Energy, the gas and oil production company surrounded by concerns over its borrowings and corporate governance, has plunged to a $1.97bn post-tax loss after taking a $3.32bn pre-tax writedown on the value of its reserves. Excluding that charge and other one-off items, the company made a profit of $33m, down from $496m in the equivalent period of 2011. Revenues were halved to $2.97bn. Chesapeake has been hit by the plunging price of natural gas, which accounts for 79 per cent of its production by energy content and 39 per cent of its revenue. Operating cash flow fell 21 per cent to $1.12bn as the realised gas price dropped from $4.82 per thousand cubic feet to $1.97. The fall for Chesapeake has been steeper than for some other companies, because forward sales of gas at higher prices have been expiring. The cost of drilling and completing Chesapeake's wells, meanwhile, rose by 24 per cent to $2.35bn, more than twice its operating cash flow. As a result, the company's debts have continued to climb, hitting $16.1bn at the end of September, up from $10.3bn at the end of 2011. Chesapeake has been shifting resources away from gas and towards more remunerative oil production, which nearly doubled over the year but is still only 14 per cent of total output. Aubrey McClendon, co-founder and chief executive, said in a statement that production of oil and natural gas liquids such as ethane was 140,000 barrels per day and on course to reach 250,000 b/d in 2015. However, while Chesapeake will put 85 per cent of its capital spending into liquids developments this year, its gas production is still rising strongly, growing 19 per cent to 523m cubic feet per day. It expects a 7 per cent drop in gas production next year, but said that management and the board "continue to review operational plans for 2013 and beyond." The company highlighted two deals that is was pursuing: the sale of some of its acreage in the Eagle Ford shale of Texas, seen as one of the most exciting areas in the US for oil production, and a joint venture or sale of some of its assets in the Mississippi Lime region of northern Oklahoma and southern Kansas, which it expects to announce by the end of the year. Chesapeake also announced on Thursday that it had engaged Bank of America, Goldman Sachs and Jefferies to arrange a new $2bn five-year loan to pay off the remainder of the $4bn high-interest loan it agreed with Jefferies and Goldman in May and some other borrowings. Mr McClendon said rising natural gas prices, the shift to oil production, further asset sales and the planned reduction of debt below $9.5bn "should enable Chesapeake to continue making significant financial progress in the 2012 fourth quarter and in 2013 as well." Unlike other oil and gas companies, which typically revalue their reserves at the end of the year, Chesapeake does so every quarter, introducing volatility into its earnings statements. The estimated volume of its reserves at the end of September, under the definition used by the Securities and Exchange Commission, was 2.7bn barrels of oil equivalent, down 14 per cent from the end of 2011. A fall in the value of those reserves caused by falling natural gas prices was responsible for part of the $3.32bn charge. The rest came from writedowns on the value of assets in the Williston basin of North Dakota and the DJ basin of Colorado, which now appear less promising than had been previously hoped. Chesapeake shares dropped 2.4 per cent to $19.59 in after-market trading.