Inspired hedging delivers $2.85 billion windfall for Chesapeake Energy

Hedge funds have taken some stick in the current economic climate, but when hedging pays off it can pay big-time, with Chesapeake Energy recently recording a $2.85 billion gain from hedges on its natural gas and oil sales.┬á┬á Chesapeake returned third quarter earnings of $3.25 billion at the end of October, almost ten times the $346 million earned in the same quarter last year. Even without the remarkable windfall, ÔÇ£realÔÇØ earnings were still up an impressive 40 percent, at $486 million.┬á┬á Revenues rose by almost a factor of four, from $2.03 billion last year to $7.49 billion. Average daily production for the quarter (of which natural gas comprised 92 percent) rose nearly 15 percent to 2,321 million cubic feet equivalent (mmcfe) from 2,026 mmcfe last year. ┬á┬á Chesapeake says it is well-positioned to ride the waves of turbulent financial markets through its commodity hedges, reduced capex spending and strong balance sheet. The company says its balance sheet has $2 billion in cash and requires no debt payments for four years.  ┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á