Energy stocks up, Chesapeake tops list on CEO exit - MarketWatch

SAN FRANCISCO (MarketWatch) — Energy stocks on Wednesday extended gains to a third session, with positive earnings pushing shares higher and Chesapeake Energy Corp. leading the way after its embattled chief executive announced his retirement.

Shares of Chesapeake   rose 8.3%, having rallied more than 10% in early trading. The natural gas producer announced late Tuesday Chief Executive Officer Aubrey McClendon has agreed to retire on April 1.

McClendon, a co-founder of the Oklahoma City, Okla. company, stepped down as chairman last year amid allegations of conflict of interest. An investigation cleared him but “the time has come for the company to select a new leader,” Chesapeake said.

Refiner Phillips 66  also topped gainers on Wednesday, on the heels of a fourth-quarter profit decline. The company, however, raised its annual dividend by 25% and added a share buyback.

Phillips 66 reported a profit of $708 million, or $1.11 a share, down from $2.01 billion, or $3.17 a share, a year earlier. Excluding write-downs and other items, earnings were up at $2.06 from 60 cents. Revenue decreased 11% to $44.67 billion on fewer asset-sale gains. Analysts projected per-share earnings around $1.68.

Shares of Pioneer Natural Resources Co.  gained 2%.

The company has agreed to sell 40% of its stake in the Wolfcamp shale field in Texas’ Permian Basin to Chinese conglomerate Sinochem Group for $1.7 billion, a move Pioneer said will accelerate development in the area.

Marathon Petroleum Corp.  shares rose 0.9% after the company posted fourth-quarter results that beat analyst expectations. The company reported a profit of $755 million, or $2.24 a share, compared with a loss of $75 million, or 21 cents a share, a year earlier.

Excluding items such as pension settlement expenses, per-share earnings were $2.26. Analysts expected per-share results of $2.10.

Marathon Petroleum’s sales and revenue were up 6.5% year over year to $20.68 billion.

Among the decliners, shares of Hess Corp.  were down 0.6%, after a two-day rally on Elliott Management’s push for a company shake-up and the announcement of asset sales.

Hess reported a profit of $566 million, or $1.66 a share, compared with a year-earlier loss of $131 million, or 39 cents a share.

Revenue increased 9.9% to $9.7 billion. Analysts expected earnings around $1.20 a share on revenue of $9.63 billion.

Hess was in the headlines Monday and Tuesday after it said it was planning to sell a New Jersey refinery and other assets. On Tuesday, the hedge fund sent a scathing letter to Hess shareholders calling for more changes at the oil and gas company and more focus on oil and gas exploration.

Big Oil shares were among the day’s laggards, with Exxon Mobil Corp.  down 0.4%. Macquarie has cut Exxon Mobil shares to neutral From outperform, the Dow Jones Newswires reported.

Rival Chevron Corp.  was also down 0.4%. ConocoPhillips  shares were off 0.3%.

ConocoPhillips is slated to report fourth-quarter results later Wednesday. The company is seen reporting earnings of $1.42 a share, down from $1.54 a share in the same quarter of 2011, on revenue of nearly $12.7 billion.

Exxon and Chevron are expected to report Feb. 1, with Exxon seen posting a profit of $1.99 a share, up 2 cents from $1.97 a share in the same period of 2011. Revenue for the quarter is seen slipping to $117 billion from $121 billion.

Chevron is expected to report earnings of $3.07 per share, up from $2.58 a share a year earlier, on $68.3 billion in revenue.

The SPDR Energy Select Sector , an exchange fund focused on energy names, was flat. Crude-oil futures  rose 0.2% at $97.71 a barrel on the New York Mercantile Exchange.

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Boeing Batteries Said to Fail 10 Times Before Incident - Businessweek

All Nippon Airways Co. (9202) said it changed lithium-ion batteries or chargers on its Boeing 787 planes 10 times before a Jan. 16 emergency landing that led to the Dreamliner’s worldwide grounding.

The disclosure came as the U.S. National Transportation Safety Board broadens its probe of the batteries beyond the ANA incident and a fire on a Japan Airlines Co. 787 nine days earlier in Boston. The safety board said it’s aware of reports of prior battery issues and is studying the power packs’ history since the 787 entered service late in 2011.

The previous battery failures didn’t cause cancellations or delays, and therefore weren’t reported to Japan’s Transport Ministry, Megumi Tezuka, an All Nippon spokeswoman, said in an interview today. More than 100 units failed and were returned to the manufacturer before the two incidents with the Japanese airlines, the Seattle Times reported today, citing an unidentified person inside the 787 program.

The safety board “will be reviewing the data related to those problems to determine if there is any relevant information,” Kelly Nantel, a safety board spokeswoman, said in an e-mail today.

The widening of the NTSB’s inquiry shows the 787’s grounding won’t end any time soon. Flights on Chicago-based Boeing’s most advanced jet were stopped by the Federal Aviation Administration and other aviation authorities Jan. 16, in the first such U.S. action involving an entire aircraft type since 1979, after a battery smoldered and emitted fumes on an ANA domestic flight in Japan.

Boeing isn’t aware of any 787 batteries being replaced because of safety concerns, Marc Birtel, a spokesman, said in an e-mailed statement today. The batteries were made by GS Yuasa Corp. (6674), based in Kyoto.

“The batteries are being returned because our robust protection scheme ensures that no battery that has been deeply discharged or improperly disconnected can be used,” he said.

Some batteries had exceeded their shelf life, he said. “This is a fact of life in dealing with batteries; they sometimes expire and must be returned,” he said.

Tokyo-based ANA was the first customer for the 787, which uses new technology such as carbon-fiber materials to save weight and improve efficiency. The plane was the first to use large lithium-ion batteries for backup power and to start the auxiliary power unit, a turbine engine that drives a generator mainly for power on the ground.

Japan Airlines also had battery issues before the Boston incident, Sze Hunn Yap, a company spokeswoman, said today. The previous incidents weren’t serious and they didn’t cause any cancellation of flights or delays, she said.

Air India Ltd. (JETIN) had no battery problems with its 787s, Chairman Rohit Nandan said in a text message.

LOT Polish Airlines SA, the only European carrier to fly the aircraft so far, hasn’t encountered any issues with batteries on its 787s, a spokesman said in a telephone interview. While there were some technical issues on the aircraft, they were “teething issues,” he said. LOT has one Dreamliner stranded in Warsaw and one in Chicago.

Mary Ryan, a spokeswoman for United Continental Holdings Inc. (UAL), the only U.S. airline operating the Dreamliner, declined to say whether the company had replaced batteries.

Boeing today said net income for 2013 will be $5 to $5.20 a share. That compares with an average estimate of $5.16 in a Bloomberg survey of 25 analysts. Boeing said its forecast assumed no significant impact from the Dreamliner’s grounding and shipments of more than 60 of the planes this year.

Under the FAA’s order, the Dreamliner won’t fly until Boeing and airlines can show the batteries are safe. The agency is also reviewing the plane’s certification and manufacture, including its own 2007 decision allowing Boeing to use lithium batteries in the plane’s design.

The NTSB, which is assisting Japan’s investigation into the ANA incident, hasn’t been able to identify what caused the failures.

Investigators are still attempting to determine whether a common manufacturing error could have led to the failures even though the batteries on the ANA and Japan Air planes were made 10 months apart, according to two people familiar with the investigation. They asked not to be identified because they weren’t authorized to speak about the probe.

The safety board hasn’t ruled out potential causes ranging from damage during operations to a circuitry failure, the people said.

U.S. investigators are putting evidence under microscopes as they also look globally for patterns of flaws with the plane’s lithium batteries, the agency said in an e-mailed update yesterday.

The battery that burned on the ANA plane was a replacement unit made in November 2011 and installed in October 2012 after an unspecified failure, according to Japan’s Transport Ministry and ANA.

The unit on the JAL plane was made in September 2012, according to the NTSB and Japan’s Transport Ministry.

Teams of NTSB specialists are examining with microscopes the battery that failed, and performing chemical analysis in the areas where they found internal short circuiting and thermal damage, according to its release.

The safety board is also scanning data contained on the JAL plane’s two flight-data recorders.

Japan’s transport ministry completed the inspections at a battery-box monitor maker based in Fujisawa yesterday, said Shigeru Takano, a director for air transportation at the ministry’s Civil Aviation Bureau. They didn’t find any problems “directly linked” to the battery fire, Takano said.

To contact the reporters on this story: Alan Levin in Washington at alevin24@bloomberg.net; Chris Cooper in Tokyo at ccooper1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Anand Krishnamoorthy at anandk@bloomberg.net

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Japanese airlines had 787 battery issues before recent incidents - Reuters

The Boeing 787 Dreamliner aircraft is surrounded by employees and special guests during its world premiere outside the Boeing assembly plant in Everett, Washington, July 8, 2007.

Credit: Reuters/Robert Sorbo

TOKYO | Wed Jan 30, 2013 10:35am EST

TOKYO (Reuters) - Japan's two biggest airlines replaced lithium-ion batteries on their Boeing Co 787 Dreamliners in the months before separate incidents led to the technologically advanced aircraft being grounded worldwide due to battery problems.

Comments from both All Nippon Airways (9202.T), the new Boeing jetliner's biggest customer to date, and Japan Airlines Co Ltd (9201.T) point to reliability issues with the batteries long before a battery caught fire on a JAL 787 at Boston's airport and a second battery was badly charred and melted on an ANA domestic flight that was forced into an emergency landing.

ANA said it changed 10 batteries on its 787s last year, but did not inform accident investigators in the United States because the incidents, including five batteries that had unusually low charges, did not compromise the plane's safety, spokesman Ryosei Nomura said on Wednesday.

JAL also replaced batteries on the 787 "on a few occasions", said spokeswoman Sze Hunn Yap, declining to be more specific on when units were replaced or whether these were reported to authorities.

ANA did, however, inform Boeing of the faults that began in May, and returned the batteries to their manufacturer, GS Yuasa Corp (6674.T). A spokesman for the battery maker declined to comment on Wednesday. Shares of the company fell 1.2 percent.

Boeing, in a statement, said battery replacements are not unusual for airplanes.

"We have not seen 787 battery replacements occurring as a result of safety concerns," the company said.

An NTSB spokesman said the board was aware of the reports of the prior battery problems and would review the data to see if it was relevant to the broader 787 probe.

LITTLE HEADWAY

Under aviation inspection rules, airlines are required to perform detailed battery inspections once every two years.

Officials are carrying out detailed tests on the batteries, chargers and monitoring units in Japan and the United States, but have so far made little headway in finding out what caused the battery failures.

Japan's transport ministry said the manufacturing process at the company which makes the 787 battery's monitoring unit did not appear to be linked to the problem on the ANA Dreamliner that made the emergency landing.

The NTSB said on Tuesday it was carrying out a microscopic investigation of the JAL 787 battery. Neither it nor the Japan Transport Safety Board has been able to say when they are likely to complete their work.

The global fleet of 50 Dreamliners - 17 of which are operated by ANA - remain grounded, increasing the likely financial impact to Boeing, which is still producing the aircraft but has stopped delivering them, and the airlines that fly the Dreamliner.

Boeing said on Wednesday that its 2013 financial forecast assumes no significant impact from the grounding. Boeing shares rose slightly in early trading and are down just 0.5 percent since the 787 was grounded.

ANA posts its earnings on Thursday. ANA shares rose 0.56 percent on Wednesday. (Reporting by Tim Kelly, Dominic Lau, James Topham, Alwyn Scott and Andrea Shalal-Esa; Editing by Ian Geoghegan)

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Global stocks weighed by disappointing US GDP data - Reuters

1 of 5. Electronic information boards display market information at the London Stock Exchange in the City of London January 2, 2013.

Credit: Reuters/Paul Hackett

NEW YORK | Wed Jan 30, 2013 10:59am EST

NEW YORK (Reuters) - An unexpected contraction in the U.S. economy in the fourth quarter sent stocks in Europe and the United States lower on Wednesday but helped keep the euro close to a 14-month high on expectations the U.S. central bank will continue its easy monetary policy.

Positive stock sentiment after strong results at Boeing and Amazon.com and a strong private sector employment report was offset by the negative U.S. gross domestic product report.

The Federal Reserve is expected to maintain asset buying at $85 billion a month when it concludes its meeting later in the day and stick to its commitment to hold interest rates near zero until unemployment falls to at least 6.5 percent from the current 7.8 percent.

That expectation was bolstered for some investors by the GDP data, which showed the world's largest economy in the fourth quarter unexpectedly suffered its first decline since the 2007-09 recession. Gross domestic product fell at a 0.1 percent annual rate after growing at a 3.1 percent clip in the third quarter.

The GDP data also overshadowed a third straight rise in European economic confidence, an increase in European Central Bank crisis loan repayments and a solid sale of five- and 10-year Italian bonds, which provided fresh evidence of the recent improvement in the region.

"This is one chink in the armor of the recent better-than-expected economic indicators. This will make people start to get wary," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. "If it turns out Sandy and the 'fiscal cliff' were the reasons for (the contraction), people will shrug it off."

The Dow Jones industrial average .DJI was down 18.43 points, or 0.13 percent, at 13,935.99. The Standard & Poor's 500 Index .SPX was down 3.08 points, or 0.20 percent, at 1,504.76. The Nasdaq Composite Index .IXIC was down 3.45 points, or 0.11 percent, at 3,150.21.

European shares .FTEU3 were down 0.5 percent, although an earlier rise in Asian shares kept the MSCI world share index .MIWD00000PUS flat after reaching a 21-month high.

EURO HIGHER

There had been optimism earlier in the day after several encouraging reports on the European economy that caused the euro to break above $1.35 for the first time since December 2011. The euro was last at $1.3563.

Expectations of easy U.S. monetary policy added to the attractiveness of the euro. In recent years investors would buy the dollar as a safer haven on bad economic data, but at least on Wednesday, they saw the euro as a better bet.

"This is a source of weakness for the dollar because it takes away the narrative that the U.S. economy is performing better than the rest of the world," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

Alongside the rebound in confidence in the euro zone, one of the key drivers behind the currency's recent spike has been the eagerness of banks to repay the crisis loans they took from the ECB just over a year ago.

Banks returned a larger-than-expected 137.2 billion euros of those loans on Wednesday and also surprised analysts by trimming their three-month funding, despite predictions they would use it partly to restock their coffers.

CONFIDENCE RALLY

The focus of the Fed decision will be on its outlook for the economy and its bond buying program after it sounded slightly more hawkish last month.

The benchmark 10-year U.S. Treasury note was down 5/32, the yield breaking a recent barrier at 2.0154 percent.

Bund futures fell to session lows on Wednesday, with investors taking the view that the contraction in the U.S. economy last year was not going to have significant impact on the Fed's policy moves.

Bund futures fell as low as 141.36, down 46 ticks on the day.

China's promising economic growth forecast for 2013 raised expectations for robust demand for fuel and industrial commodities, underpinning oil prices and lifting copper.

Brent crude oil reached its highest level in three and a half months as it passed $115 a barrel. It last traded at $114.60. U.S. light sweet crude oil was flat at $97.57 per barrel.

"Oil has followed risk assets higher, but we think it's strong versus the fundamentals, with production cuts needed from Saudi Arabia due to strong supply from OPEC," cautioned Filip Petersson, an SEB analyst in Stockholm.

(Reporting by Nick Olivari; Editing by Dan Grebler)

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Wall Street Cheers Exit of Chesapeake CEO McClendon - Fox Business

By Matt Egan

Published January 30, 2013

FOXBusiness

Shares of Chesapeake Energy (CHK) soared 7% on Wednesday as Wall Street bets the departure of longtime CEO Aubrey McClendon will allow the natural-gas producer to turn the page on a rocky 2012 and clear the way for asset sales.

Chesapeake announced late Tuesday that McClendon, 53, will retire on April 1 even though an extensive review of alleged conflicts of interest and other matters involving the executive found “no improper conduct.”

The No. 2 U.S. natural gas producer and McClendon had been dogged by probes from federal regulators and the board about antitrust issues and the executive’s conduct in financing matters.

In a statement, McClendon acknowledged “certain philosophical differences” with the new board but said he will work to ensure a “smooth transition.”

Chesapeake, which has been searching for direction amid a heavy debt load, said McClendon will continue to serve as CEO until a successor has been appointed. McClendon has led the company since its founding in 1989.

Chesapeake Chairman Archie Dunham praised McClendon for his “strong leadership” and credited him with creating “one of the most valuable and innovative companies in the energy industry.”

“However, as the company moves towards more fully developing the value of its outstanding assets, Chesapeake is at an important transition in its history and Aubrey and the board of directors have agreed that the time has come for the company to select a new leader,” said Dunham.

Chesapeake said the decision to find a new CEO is not related to the board’s pending review of McClendon’s financing arrangements and other matters, which is scheduled to be released on February 21.

“I am extremely proud of what we have built over the last quarter of a century, and I am confident that Chesapeake is in a great position to continue to grow and achieve great success in the future as it realizes the full value of its outstanding assets,” said McClendon.

Activist investor Carl Icahn who has helped shake up Chesapeake released a statement late Tuesday saying McClendon has a “right to be proud” of the talent and collection of assets he has built.

“While it is known that some of these assets will be sold by the company in due course, I do not believe that this will in any way effect the ultimate realization of Chesapeake's potential,” Icahn said.

Despite the cloud of controversy following McClendon, Chesapeake said the executive will receive his “full” compensation and other benefits. According to Reuters, McClendon is entitled to receive total compensation of about $47 million, including $11.7 million in total cash compensation based on salary and bonus and $33.5 million in restricted stock awards.

The company has hired executive-search firm Heidrick & Struggles to help find a successor to McClendon, who also serves as chairman and president.

Shares of Oklahoma City-based Chesapeake jumped 7.22% to $20.34 Wednesday morning, leaving them up 22% so far this year.

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US Data React: ADP Beats Estimates, Might Raise The Bar In Jan - MNI News

By Ian McKendry

WASHINGTON (MNI) - The January ADP employment report beat expectations with 192,000 private sector jobs added for the month, and could be an indication that private employment growth is starting to pick up.

"I feel like its 175 [thousand]," Mark Zandi, chief economist at Moody's Analytics said on CNBC immediately after the ADP report was released. He was referencing job growth-per-month as measured by the Bureau of Labor Statistics in its employment report.

Official January jobs data will be published Friday, and the median forecast in a survey of economists by MNI is for private payrolls to increase by 156,000 in January. MNI's median forecast for the ADP report was a 155,000 increase in jobs, while the median forecast for overall job growth in January, including the public sector, is for 160,000 jobs added.

Over the last five months, private job growth in the BLS report has had an average increase of about 160,000 -- which is about 15,000 more than ADP for comparable months -- but with the latest ADP figures, the average moved up about 8,000 to 153,000.

"I feel like it's moved up and I think that will be confirmed on Friday when we get the BLS data, because we will get the benchmark revisions and we know that will be revised up," Zandi said.

The preliminary revisions to the employment report by the BLS in September implied that private payroll growth for 2012 would be revised up by about 450,000 jobs on the year.

While the headline figure was better-than-expected, the December ADP payrolls number was revised down from up 215,000 to up 185,000 which caused some analyst to raise caution.

Andrew Grantham, an economist at CIBC wrote in a research note that the downward revision "largely offsets the upside surprise from the latest number," but added that CIBC is maintaining their above consensus forecast for headline job growth to increase by 188,000 in January.

TD Securities strategist Millan Mulraine was slightly more bullish on the ADP report but maintained a lower forecast for the BLS jobs report.

"The better-than-expected ADP print of 192,000 for private sector employment in January points to some modest upside bias for the current consensus forecast of 168,0000 for private payrolls (161,000 on total payrolls)," Mulraine said in a research note, adding "this was the first time in some time that this has taken place and it is an indication that this segment of the economy is finally beginning to provide a tailwind for growth."

However, Mulraine said TD is also maintaining their below-consensus payrolls forecast for +154,000 jobs added in January.

First Trust was the first and only (so far) of MNI's survey participants to revise their BLS Employment report forecast based on the ADP report, revising their forecast for overall job growth from +145,000 to +160,000 and likewise their forecast for private sector job growth from +150,000 to +165,000.

--MNI Washington Bureau; tel: +1 202-371-2121; email: imckendry@mni-news.com

[TOPICS: MAUDS$,M$U$$$]

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With 787 Dreamliners Still Grounded And Few Leads On Battery Fires, Boeing ... - Forbes

NTSB chair Deborah Hersman reveals little progress in their investigation of the 787 Dreamliner fire in Boston - Image credit: Getty Images via @daylife

Despite delivering a solid quarter and decent guidance, Boeing was still in the spotlight given issues with its 787 Dreamliners, which have been grounded across the globe.  The company revealed it has delivered nearly 50 787s over the past two years, with chief executive Jim McNerney adding “our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers.”

Boeing managed to beat EPS estimates, earning $1.28 on a GAAP basis; Wall Street expected $1.19.  While net income fell 30% to $978 million, better commercial sales and improved margins offset weakness at Boeing’s defense, space & security (BDS) unit, which faces the specter of sequester cuts.

With the 787s on everyone’s mind, Boeing unveiled record sales of $22.3 billion, up 14% from a year ago and in line with estimates.  The company’s total backlog rose to $390 billion, while operating cash flow stood at $4.2 billion.  In all, 787 deliveries total 49 since becoming available to airlines in late 2011.

Regulators in the U.S. and Japan, along with engineers at Boeing, have been trying to figure out what caused fires on several Dreamliners, forcing the FAA and other agencies to ground all the operating aircraft indefinitely.  The National Transportation Safety Board (NTSB) revealed last week they are still working to find what sparked the malfunctions, while Japanese regulators ruled out the battery and its charger, manufactured by Japanese firm GS Yuan, as the cause.

With regulators at a loss and Boeing failing to detail what their internal investigation has shown, a cloud hangs over the stock, which remains essentially flat from a year ago.  According to a report in the New York Times, the two airlines operating the largest number of 787 Dreamliners, All Nippon Airways and Japan Airlines, had experienced battery problems before the two incidents that caused the grounding.

All Nippon had replaced 10 batteries prior to the incidents on their 787s, with five of them showing unexpectedly low charge, and three failing to start correctly.  Boeing convinced regulators to allow the use of lithium-ion batteries on its 787, which are lighter and pack more energy than traditional nickel-cadmium batteries, but are prone to catching on fire.  Until the battery issue is resolved, Boeing’s shares will remain “handcuffed,” as Citi analyst Jason Gursky put it.

The company did give 2013 guidance, with GAAP EPS expected to fall between $5.00 and $5.20 (analysts expected $5.13).  Core EPS, which excludes pension expense, was forecast at $6.10 to $6.30.  Revenue guidance came in a bit light, at $82 to $85 billion probably on lower than expected 787 deliveries; Wall Street was looking for $88 billion.

Production marches on and Boeing’s cash outlook is improving, Citi’s analyst explained, but attention will remain centered on the 787 Dreamliner and its battery issues.  Shares in Boeing zigzagged in early trading, but were making their way up by 11:12 AM in New York, gaining 1.2% to $74.50.  Competitor Lockheed Martin was down 1%, while major airlines like Delta, JetBlue, Southwest, and United Continental were mixed.

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Chesapeake Energy shares jump on CEO departure - Businessweek

NEW YORK (AP) — Chesapeake Energy Corp. shares jumped more than 5 percent Wednesday morning, as analysts said the departure of embattled CEO Aubrey McClendon gives Chesapeake the chance to boost shareholder returns.

THE SPARK: After the markets closed on Tuesday, the natural gas producer announced that McClendon will step down as CEO from the company that he founded 24 years ago. Chairman Archie Dunham said the company needed a new leader to help develop its oil and gas assets.

THE BIG PICTURE: McClendon, 53, was hailed for his aggressive acquisitions of oil and gas drilling rights that paid off as new technology helped drillers extract gas locked in shale formations. But the company's fortunes sagged when that same technology led to a production bubble and falling gas prices.

Some of McClendon's business dealings also raised questions about Chesapeake's corporate governance. McClendon said in a statement that philosophical differences with a new board led to his decision to depart, but he said he would work with the company on a transition to new leadership.

THE ANALYSIS: Citigroup analyst Robert S. Morris said McClendon's departure will strengthen the board's control of the company and pave the way for a new CEO "who could bring a fresh perspective to unlocking shareholder value." He said the stock trades at a steep discount to the value of the company's assets.

"We view the development as a positive catalyst" for the stock Morris wrote in a note to clients.

Stifel Nicolaus analyst Amir Arif upgraded Chesapeake shares to "Buy," saying McClendon's departure could mean the company will be put up for sale, or will step up sale of its assets.

"We believe that a certain segment of the investment community, who were disinclined to invest in the company due to corporate governance concerns might now take a second look at the company, creating a slightly improved potential investor base," Arif wrote in a note to investors.

SHARE ACTION: Chesapeake shares rose 99 cents, or 5.2 percent, to $19.96 in morning trading. Earlier in the session the stock reached $21.41. The shares have ranged from $13.32 to $26.09 over the past 52 weeks.

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CEO Leaves Chesapeake Cash-Starved After Icahn-Led Revolt - San Francisco Chronicle

(Updates with share price in third paragraph.)

Jan. 30 (Bloomberg) -- Chesapeake Energy Corp.’s departing chief executive officer will leave to his successor a shrunken, cash-starved version of what was once the preeminent natural gas producer in the world’s biggest market for the fuel.

Aubrey McClendon’s agreement to resign effective April 1 culminated a shareholder revolt by Carl Icahn and Southeastern Asset Management Inc.’s O. Mason Hawkins that earlier had cost the CEO the chairmanship he’d held for more than two decades. McClendon also relinquished his annual bonus and saw executive perks curtailed amid federal investigations of a portfolio of personal loans that topped $840 million.

Chesapeake soared 11 percent to $20.99 at 9:43 a.m. in New York, the biggest intraday gain in almost six months.

Chesapeake lost as much as 43 percent of its market value in 2012 as scrutiny of McClendon’s financial transactions destroyed investor confidence in management and cratering gas prices drained the company of cash. Unfinished tasks facing the next CEO include raising $8 billion from asset sales this year to plug a funding shortfall, and converting a company that pumps enough gas to supply 20 percent of American household demand into an oil producer.

“Companies have life cycles and during various stages it can make sense for some people to leave,” Philip Weiss, an analyst at Argus Research Corp. in New York, said in a telephone interview. “Aubrey McClendon was very good at accumulating land but now that Chesapeake is moving into an asset-harvesting mode, they must have decided they needed someone with another set of skills.”

Board Investigation

An internal board investigation of McClendon’s use of his stakes in thousands of company-owned wells to secure personal loans so far has found nothing improper, Chesapeake said in a statement yesterday released after the close of regular trading.

“The imminent departure of CEO McClendon proves that major strategy changes are likely, and we envision a reduced spending environment that is less reliant on asset sales,” Tim Rezvan, an analyst at Sterne Agee & Leach Inc. in New York, who has a neutral rating on Chesapeake shares, wrote in a note to clients today.

Chesapeake’s 6.775 percent bonds due to mature in March 2019 rose 0.75 cents to 100.75 cents on the dollar to yield 6.622 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Archie Dunham, the former ConocoPhillips chief who replaced McClendon as chairman in June, thanked the outgoing CEO for his “enormous achievements,” in an e-mail to employees. The company isn’t for sale and employee perks such as on-site childcare and a fitness center at the company’s Oklahoma City headquarters won’t be discontinued, Dunham wrote.

‘Philosophical Differences’

In a separate e-mail to Chesapeake employees, McClendon attributed his imminent departure to “certain philosophical differences” between him and the board without elaborating. Dunham and McClendon declined to be interviewed for this story, according to Michael Kehs, a Chesapeake spokesman.

Icahn and Hawkins, who together control 22 percent of Chesapeake’s stock, pushed for McClendon’s resignation after concluding his presence and the controversy surrounding his personal business deals was hurting the company’s share price, a person with knowledge of the discussions said. Icahn and Hawkins didn’t immediately respond to messages left at their offices after normal business hours yesterday.

Company Founder

McClendon, 53, led Chesapeake from its 1989 inception in Oklahoma City, amassing U.S. gas and oil fields that cover an area equivalent to half the size of New York state. As one of the first explorers to embrace horizontal drilling and hydraulic fracturing, McClendon helped usher in a revival of U.S. gas and oil production with discoveries such as the Haynesville Shale in Louisiana and Utica Shale in Ohio.

The success of the drilling methods led to a glut of North American gas that drove prices to a 10-year low in early 2012, causing Chesapeake to cut jobs, curtail capital spending and sell about $11 billion in oilfields and pipelines to help close a gap between cash flow and drilling expenses. The company lost $1.07 billion during the first three quarters of last year and net debt ballooned by 56 percent during that period to $16.1 billion.

The board will release final results of its review of McClendon’s financial transactions on Feb. 21, when announcing fourth-quarter results.

Smooth Transition

“While I have certain philosophical differences with the new board, I look forward to working collaboratively with the company and the board to provide a smooth transition to new leadership,” McClendon said in the statement.

McClendon’s departure under a mutual agreement with the board will be treated as a “termination without cause” rather than a retirement, said a person with knowledge of his departure terms, who spoke on the condition that he not be identified.

Those terms will entitle McClendon to compensation including $34 million in accelerated vesting of restricted stock that he was awarded previously, and about $12 million in cash severance and benefits to be paid out over four years, the person said.

A retirement before Dec. 31 of this year, according to a May filing detailing severance terms, would have required McClendon to repay part of a special $75 million cash payment the company awarded him in 2008. The “clawback” would be worth about $11 million based on an April departure, according to a formula disclosed in the filing.

No Clawback

Based on the terms of a termination without cause, Chesapeake won’t collect any clawbacks from McClendon in connection with his resignation, the person with knowledge of the matter said.

Chesapeake lagged U.S. energy producers such as Devon Energy Corp. in shifting rigs from gas fields to higher-profit oil prospects, leaving the company more vulnerable to slumping gas prices.

“You can be the smartest guys in the room but you may be in the wrong room,” McClendon said during a March interview in a restaurant on the company’s Oklahoma City campus. “It’s not enough to be the smartest guys in the room. Sometimes you have to be hungry, sometimes you have to be lucky, and you have to be open to change.”

Well-Investment Program

McClendon’s fall from grace began in April after media reports spotlighted personal loans he obtained using minority stakes in company-owned wells that he had been allowed to gather for his private portfolio. Chesapeake stock lost 20 percent of its value that month as scrutiny of McClendon’s personal transactions compounded the impact of free-falling prices on a company whose output was more than 80 percent gas.

Under an executive perk designed to align McClendon’s personal interests with those of the company, the CEO acquired stakes as large as 2.5 percent in almost every well Chesapeake drilled during the past 24 years. McClendon took out loans backed by his well stakes to fund his portion of costs. At the end of 2011, he owed $846 million on those loans, the company reported on April 26.

Some of the loans came from companies that were involved in separate financial transactions with Chesapeake. The Internal Revenue Service and U.S. Securities and Exchange Commission began probes.

Board Changes

In addition to deposing McClendon from the chairmanship, Icahn and Hawkins installed new board members to intensify oversight of a management team that outspent cash flow in 19 of the past 21 years. Chesapeake said last year it would halt the well-investment program at the center of McClendon’s loan portfolio next year rather than the original termination date at the end of 2015.

“Aubrey has every right to be proud of the company he has built, the world-class team of people at Chesapeake and the collection of assets he has assembled, which in my opinion, are the best portfolio of energy assets in the country,” Icahn said in a statement yesterday.

McClendon raised more than $30 billion since 2008 selling burgeoning shale assets to companies including Exxon Mobil Corp., Paris-based Total SA and Cnooc Ltd., China’s largest offshore energy producer.

“I have the utmost confidence in you and the company’s future and I will always treasure the time we have spent together building Chesapeake into the unique and dynamic company that it is today,” McClendon said in his e-mail to employees late yesterday.

--With assistance from Edward Klump in Houston, Jim Polson and Zachary R. Mider in New York, Mike Lee and Susan Warren in Dallas, Julie Johnsson in Chicago and Mark Chediak in San Francisco. Editors: Susan Warren, Andrew Hobbs

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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Analyst: McClendon's Exit From Chesapeake Is Good News, But It Does Nothing ... - Business Insider

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Enter you email address and zip code to set up customized email alerts.You have successfully emailed the post. Rob Wile | Jan. 30, 2013, 10:42 AM | 0 | Associated Press

Aubrey McClendon is on his way out as CEO of Chesapeake Energy.

But its cash and debt problems remain, writes Argus Research's Phil Weiss.

Weiss is arguably the top Chesapeake analyst, having nailed recent filings and getting named the second-best sell-side energy analyst on the Street by Reuters.   

In a special note released this morning following McClendon's announcement, Weiss says he will not upgrade Chesapeake because its books remain totally lopsided:

We remain concerned about liquidity and leverage at HOLD-rated Chesapeake Energy Corp. (NYSE: CHK), particularly after management's admission in November that its debt reduction goal would be pushed back. In addition, a number of asset sales that we had expected to be completed by now have still not been announced.

While he sees McClendon's retirement as a "positive development," Weiss says these problems will not disappear simply as a result of management and board restructuring. Potential buyers of the company's assets, he says, are almost certainly thinking the same thing:

...we prefer to see concrete evidence of change rather than rely on management's proclamations. We also think that the delayed asset sales may highlight an issue we have discussed in the past: the market is aware of CHK's liquidity issues, and potential buyers are likely driving hard bargains.

Shares are up 6 percent today.

SEE MORE: The Rise And Spectacular Fall Of Aubrey McClendon >

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Chesapeake Default Swaps Decrease After CEO Departure Announced - Businessweek

The cost of protecting Chesapeake Energy Corp.’s (CHK) debt from losses plunged after the company announced yesterday that Chief Executive Officer Aubrey McClendon would retire.

Five-year credit-default swaps on the Oklahoma City-based company’s debt dropped 72.5 basis points to 391.9 basis points as of 7:30 a.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Default swaps, which typically fall as investor confidence improves and rise as it deteriorates, pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

McClendon will retire on April 1 from the company he co- founded and will serve as CEO until his successor is appointed, the company said yesterday in a statement.

To contact the reporter on this story: Madhura Karnik in New York at mkarnik@bloomberg.net

To contact the editor responsible for this story: Richard Bravo at rbravo5@bloomberg.net

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While Chesapeake's Price Soars On McClendon's Departure, Thunder's May Fall - Forbes

After it was announced yesterday that Chesapeake Energy’s CEO, Aubrey McClendon, was leaving the company, its stock price soared in after hours trading.

Oklahoma City Thunder's Kevin Durant (L) goes up for a basket against Miami Heat's LeBron James during Game 2 of the NBA Finals at the Chesapeake Energy Arena in Oklahoma City, Oklahoma, June 14, 2012 (Image credit: AFP/Getty Images via @daylife).

But McClendon’s departure may not bode as well for the Oklahoma City Thunder. McClendon is on the board of the National Basketball Association team. McClendon, whose dubious self-dealings have been well-publicized, owns just under 20% of the basketball team.

Last year Darren Rovell reported that the natural gas producer had been buying millions of dollars of Thunder tickets. And two years ago the team sold its naming rights to Chesapeake in a 12-year deal that begins at $3 million and increases 3% a year.

The Thunder, who lost in the NBA finals to the Miami Heat last year, sold out all their games during the 2011-12 season and had a 99% renewal rate on season tickets for the current season. Last week we valued the team at $475 million, 12th in the league and 36% higher than the previous year.

The Thunder currently have the second-best record in the Western Conference and with Kevin Durant leading the way could make it back the finals. But given Oklahoma City’s small market (the Thunder had the fourth-smallest local television audience among the league’s 30 teams last year), McClendon’s connection to Chesapeake may be sorely missed if the team stumbles.

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Private survey shows employers added 192000 jobs in January - Los Angeles Times

The construction industry added jobs in January, according to a private-sector report. (Andrew Harrer / Bloomberg)

Private-sector employers added 192,000 jobs in January, more than economists had expected, indicating Friday’s jobs report from the government may be a good one.

The numbers, from a private survey by payroll processor ADP, provided a glimmer of optimism about the economy the same morning the government reported the nation’s GDP contracted in the fourth quarter.

“It feels to me that the job market is improving,” said Mark Zandi, chief economist for Moody’s Analytics. “Job growth has accelerated.”

Job growth is now hovering at about 175,000 jobs a month, he said, which should be enough to bring the unemployment rate down every month. Zandi predicts the unemployment rate, currently at 7.8%, will fall to 7.3% by the end of the year, and will dip below 7% by this time next year.

Although the ADP report showed weakness in the manufacturing sector, probably related to sluggish European economies, it showed growth in construction, trade and professional and business services.

Small businesses, with one to 49 employees, provided the bulk of the hiring, ADP said. Small businesses added 115,000 jobs. Medium businesses, with 50 to 499 employees, added 79,000. Large businesses actually shed 2,000 jobs in January.

The ADP report only tracks private-sector employment, while Friday’s jobs report also includes the government sector, which has been contracting for the better part of two years. The numbers usually provide some guidance to economists about what to expect from the national job figures, although last month, ADP showed employers had added 215,000 private-sector jobs, while the government figures showed that the private sector added just 168,000.

Zandi was quick to emphasize the good news about the ADP report, while downplaying the surprising GDP contraction. He said that when the government revises the number, he expects it will show growth, rather than contraction, in the fourth quarter.

“I will be surprised if we end up with negative quarter,” he said.

Still, GDP growth will only grow 1.5% in the first quarter of this year, he said, which is not a very impressive number. That’s because a payroll tax was restored after two years, meaning consumers have less take-home pay, and probably will spend less as they adjust to their new finances.

The Dow Jones Industrial Average, on the brink of passing 14,000, was down in early market trading.

ALSO:

Economy shrinks unexpectedly in fourth quarter

U.S. economy grows by 155,000 jobs in December

Consumers to see smaller paychecks despite fiscal cliff deal

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Jobs Creation Remains at A Stable Pace - Wall Street Pit

Private payrolls increased by 192,000 in January, according to this morning’s ADP Employment Report. That’s a bit stronger than December’s 185,000 gain and it’s the best monthly pop in nearly a year. Today’s release tells us that jobs creation remains at a stable, if not slightly better pace relative to the trend in recent months. In turn, that sets us up for thinking positively about Friday’s January payrolls report from the Labor Department. Meanwhile, it seems that the economy’s capacity for moderate growth appears to be intact in the new year, at least as far as jobs are concerned via ADP’s analysis.

“The job market is slowly, but steadily, improving,” says Mark Zandi, chief economist of Moody’s Analytics, in a press release that accompanied today’s report. “Monthly job gains appear to have accelerated from near 150,000 to closer to 175,000. Construction is finally kicking into gear and more than offsetting the weakness in manufacturing. The recent gains may be overstating any improvement, particularly in the context of recent revivals in growth at the start of the past three years, but the gains are encouraging nonetheless.”

An econometric review of the historical relationship between the ADP data and the private-sector payrolls numbers from the government implies that Friday’s official jobs update will post a modest improvement over December’s 168,000 gain, which was the lowest monthly increase since last June. Running a regression analysis on the monthly changes for the ADP and government numbers, and assuming the relationship holds for January, suggests that Friday’s increase will be on the order of roughly 191,000 for private jobs.

Precise forecasts are always suspect, of course, but today’s ADP report implies that the government’s January payrolls report will deliver another decent, if not necessarily impressive, number. In that case, we’ll have another data point to consider for assuming that the slow-growth trend for the economy survived the fiscal cliff debate last month and remains alive and kicking in the new year.

Yes, the January numbers have only started to trickle in, and so it’s premature to say anything definitive about the kick-off for 2013. So far, however, the few data points we do have continue to lean in a positive direction.

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US Economy Unexpectedly Contracted in Fourth Quarter - New York Times

The drop in gross domestic product was driven by a plunge in military spending, as well as fewer exports and a steep slowdown in the buildup of inventories by businesses. Anxieties about the fiscal impasse in Washington also contributed to the slowdown, one reason stockpiles grew more slowly.

Despite the overall contraction, there was underlying data in the report suggesting the economy is not on the brink of a recession or an extended slump. Residential investment jumped 15.3 percent, a sign that the housing sector continues to recover, for one. Similarly, investment in equipment and software by businesses rose 12.4 percent, an indicator that companies are still spending. Although economists expected output to decline substantially from the 3.1 percent annual growth rate recorded in the third quarter, the negative number still caught Wall Street off-guard. It was the weakest economic report since the second quarter of 2009.

“I’m a little surprised,” said Michael Feroli, chief United States economist at JPMorgan. “It grabs your attention when you have a negative number across everyone’s screens.”

Stocks were down only slightly in early trading on Wall Street, as some traders shrugged off the unexpected drop.

Mr. Feroli had been expecting growth to come in at 0.4 percent, which was well below the 1.1 percent consensus among economists on Wall Street. Like some other observers, Mr. Feroli said there were hints the economy was performing slightly better than the headline number suggested.

The 22.2 percent drop in military spending – the sharpest quarterly drop in more than four decades – along with the drop in inventories and exports overwhelmed more positive indicators in the private sector, he said.

For example, final sales to private domestic purchasers, which strips out government spending as well as trade and inventories, rose by 2.8 percent. “Consumers and businesses kept spending at a pretty steady pace,” Mr. Feroli said. “There was a lot of noise that moved the headline around.” For the entire year, the economy grew by 2.2 percent, a slight improvement from the 1.8 percent annual rate in 2011.

But with unemployment stubbornly high at 7.8 percent and growth expected to remain slow in the first quarter, the poor report Wednesday was likely to set off more finger-pointing in Washington.

The compromise between President Obama and Congress earlier this month allowed a temporary cut in Social Security taxes to expire, which is expected to crimp growth in the first quarter. The change will cost a worker earning $50,000 a year an extra $1,000 annually.

Indeed, a consumer confidence survey released Tuesday by the Conference Board showed a sharp downturn in January, which economists attributed in part to financial anxiety arising from the reduction in take-home pay.

The consensus estimate for early 2013 is currently calling for output to rise at an annual rate of 1.5 percent, but that number may come down in the wake of Wednesday’s report.

This was the Commerce Department’s first estimate of fourth-quarter growth; revisions are due in February and March, so the final figure could go up or down significantly.

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Boeing Posts Strong 4Q, Says Dreamliner Won't Weigh Down Bottom Line - Forbes

Boeing CEO Jim McNerney exits a 787 Dreamliner on July 18, 2010.  (Image credit: AFP via @daylife)

Aerospace giant Boeing posted higher than expected earnings and raised 2013 projections on Wednesday morning, saying that the company has hit a record backlog of orders, and that the recent grounding of its 787 Dreamliner fleet won’t significantly affect business.

For the fourth quarter of 2012, Boeing reported profits of $978 million, or $1.28 a share, down from $1.39 billion a year earlier, when the company benefitted from a special tax gain. Analysts expected earnings of $1.19 per share. Quarterly revenues were $22.3 billion, up 14% year over year.

Shares of Boeing stock were up less than half a percent after the market open.

“Strong fourth-quarter operating performance capped a year of significant growth and solid execution, driving higher earnings and cash flow for our company,” said Boeing Chairman, President and Chief Executive Officer Jim McNerney. “Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers.”

The strong earnings report was buoyed by strong demand for Boeing aircraft: Boeing Commercial Airplanes fourth-quarter revenue increased to $14.2 billion and full-year revenue increased to a record $49.1 billion. The company booked 394 net aircraft orders during the fourth quarter, and its backlog is now at a record 4,400 planes valued at a record $319 billion.

Boeing set 2013 revenue guidance between $82 and $85 billion, with earnings per share between $5.00 and $5.20.  The company says its current financial guidance assumes no significant financial impact from the FAA-mandated grounding of its 787 Dreamliner fleet.

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Boeing Aims to Deliver More Than 60 787s in 2013 - Fox Business

Boeing Co. said Wednesday that it expected to deliver 60 or more 787 Dreamliner jets this year, a cautious forecast that it can quickly resolve the electrical problems that have grounded the global 787 fleet.

The company's guidance came as it reported a 30% drop in fourth-quarter profit from a year-earlier period that was helped by a favorable tax settlement, masking the aerospace and defense company's revenue growth driven by higher deliveries of commercial airplanes.

The aerospace and defense giant's reported earnings come as the U.S. economy unexpectedly shrank .1% in the fourth quarter of 2012, the result of superstorm Sandy and reduced defense spending, the Commerce Department said Wednesday.

Boeing projected it will deliver its highest number of commercial jets in its history--635 to 645--this year compared with 601 in 2012 as it boosts production of its single-aisle 737 and twin-aisle 777 jets. The outlook assumes deliveries of 787s will exceed 60.

The company's backlog of commercial, defense and space products rose to $390 billion and generated $81.7 billion in revenue in 2012, which Boeing says are both records.

The Dreamliner delivery figure, however, reflects Boeing's caution about the pace it can sustain once the now-two week-old imposed Federal Aviation Administration grounding is lifted. The company today is building at a rate of five 787s per month, expected to go to seven per month before mid-year, but the full-year guidance reflects a lower overall delivery rate.

Boeing plans to accelerate production of the 787 to ten per month by the end of the year, with expectations of delivering as many as 120 Dreamliners in 2014.

Doug Harned, aerospace analyst for Buckingham Research called the delivery guidance "disappointing" in a research note and said it was unlikely that the accelerating production would be sustained throughout the 787's extended supply chain as the company moved to begin assembly of a new larger Dreamliner in the second half of this year.

The 787, made from a majority of carbon fiber composites, has been beset by delays during its development, which stretched three and a half years longer than expected.

"Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers, said Chairman and Chief Executive Jim McNerney. "At the same time, we remain focused on our ongoing priorities of profitable ramp up in commercial airplane production, successful execution of our development programs, and continued growth in core, adjacent and international defense and space markets."

The company's defense business also has been under pressure amid uncertainty about U.S. government spending. During November the defense division unveiled plans to trim its executive ranks, part of Boeing's efforts to reduce costs amid uncertainty about future Pentagon budget cuts.

Boeing reported a profit of $978 million, or $1.28 a share, down from $1.39 billion, or $1.84 a share, a year earlier.

Core operating earnings-which now exclude pension components related to market fluctuations and other impacts, a change in how Boeing reports its quarterly earnings-were $1.46 compared with $1.92 a year earlier, which included 52 cents a share related to a favorable tax settlement.

The move by the aerospace and defense giant reflects long-standing concern from Wall Street that the company's pension obligations weighed on its overall earnings performance.

Quarterly revenue increased 14% to $22.3 billion. Analysts polled by Thomson Reuters most recently projected earnings of $1.19 on revenue of $22.36 billion.

The company's commercial airplanes segment posted revenue growth of 29% amid stronger deliveries, while operating earnings increased 29%. Revenue growth at its military aircraft business was offset by declines at its networks and space systems division and global services and support business.

The company's defense business reported revenue declined 1.5%, while operating earnings were down 13%.

For the year, the company projected per-share earnings of between $5 and $5.20 on revenue of between $82 billion and $85 billion. Analysts polled by Thomson Reuters recently expected per-share profit of $5.13 and revenue of $88.19 billion.

Write to Jon Ostrower at jon.ostrower@wsj.com

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Copyright © 2013 Dow Jones Newswires

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Full speed ahead for Fed after surprising Q4 GDP drop - MarketWatch

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Boeing's Dreamliner production plans not changing - USA TODAY

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Officials inspect an All Nippon Airways Boeing 787 which made an emergency landing at Takamatsu airport in Takamatsu, western Japan, earlier this month. (Photo: AP)

Company says its first order of business is to fix battery problems on the DreamlinerPlane maker's profits up 9% in fourth quarter, year over yearBoeing's net income beats estimates, excludes pension-related costs

Boeing announced record revenue of $81.7 billion for 2012 Wednesday and said it has no plans to change its 787 Dreamliner production schedule despite a government directive to investigate recent fires associated with the giant airplanes

In a fourth-quarter earnings report, the Seattle-based plane maker says it foresees "no significant impact" on its earnings or plans going forward from the recent problems that grounded the worldwide fleet of 787 Dreamliners.

"Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers," says Jim McNerney, Boeing's CEO.

The report coincided with Japan's All Nippon Airways (ANA) announcing that it had replaced lithium-ion batteries on its 787 Dreamliners 10 times because of a low charge before the jets were grounded worldwide on Jan. 16 due to battery problems, the New York Times reported Wednesday.

ANA spokeswoman Megumi Tezuka said Wednesday the airline was not required to report the battery swapping cases to Japan's Transport Ministry because they did not raise safety concerns and did not interfere with flights.

She said the batteries were replaced because they failed to charge properly or showed other problems.

In Seattle, Boeing spokeswoman Kate Bergman told USA TODAY that the company was aware of The New York Times report but had no comment.

In the United States, the National Transportation Safety Board and Federal Aviation Administration are conducting an investigation of the Boeing 787's battery problems.

Regulators said Wednesday they asked Boeing Co. to provide a full operating history of lithium-ion batteries used in its grounded 787 Dreamliners.

Kelly Nantel, a spokeswoman for the NTSB, says investigators only recently heard there had been "numerous issues with the use of these batteries," but "that will absolutely be part of the investigation."

All 50 Dreamliners worldwide were grounded after an ANA flight on Jan. 16 made an emergency landing in Japan when its main battery overheated. Earlier, on Jan. 7, a battery in a Japan Airlines 787 caught fire while parked at Boston's Logan International Airport.

PHOTOS: Which airlines have Dreamliners?
PHOTOS: The Boeing 787 flies for United Airlines

In Boeing's fourth quarter earnings report, the company reported earning $1.28 per share vs. Wall Street estimates of $1.19 a share on revenues of $22.4 billion. Excluding pension-related costs, Boeing's profits were up 9% in the fourth quarter vs. the same period a year ago.

"Strong fourth-quarter operating performance capped a year of significant growth and solid execution, driving higher earnings and cash flow for our company," McNerney says.

The company delivered more than 600 commercial airliners last year, including the first three Dreamliners built in Charleston.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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US private hiring edges up in January - AFP

US private hiring edges up in January(AFP) – 1 hour ago 

WASHINGTON — Hiring by the US private sector edged higher in January to an estimated 192,000 net new jobs, compared to 185,000 the previous month, payrolls firm ADP said Wednesday.

Gains were strongest in the services sector and trade and transportation industry, while manufacturing rolls fell by 3,000, the ADP report said.

Private sector hiring has grown steadily from midyear 2012 when the monthly pace was closer to 100,000; the past three months averaged 183,000.

"The job market is slowly, but steadily, improving," said Mark Zandi, chief economist of Moody's Analytics, which helps ADP compile the data.

"Construction is finally kicking into gear and more than offsetting the weakness in manufacturing.

"The recent gains may be overstating any improvement, particularly in the context of recent revivals in growth at the start of the past three years, but the gains are encouraging nonetheless."

On Friday the government releases the official job creation and unemployment estimates for January, which are expected to show little if any improvement from December, when 155,000 net new jobs were created and the jobless rate held at 7.8 percent.

But a recent fall in weekly numbers on new unemployment insurance claims, a sign of the pace of layoffs, could be a good sign for job creation, some analysts say.

Copyright © 2013 AFP. All rights reserved. More »

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Fed call, GDP, ADP report in focus - MarketWatch

By MarketWatch

U.S. stock futures indicate a soft Wednesday start for Wall Street, as a surprisingly weak reading on gross domestic product leaves investors disappointed. Equity markets are also lower in Europe, while Japanese shares closed at a 33-month high overnight.

U.S. stock-index futures drift lower as Wall Street digests a raft of economic data and with the outcome of a two-day Fed meeting looming. Earnings from blue chip Boeing among other major companies are also on offer.

Weakness in European stocks reflects in part investor caution ahead of a keenly watched announcement from the U.S. Federal Reserve.

U.K. stocks extend gains into a sixth straight session, with heavyweight banks and energy shares on the rise.

An improved economic outlook boosts Asian markets, lifting stocks in Hong Kong and Australia to near two-year highs, while Japanese shares end at their loftiest in 33 months, also fueled by earnings optimism.

The euro pushes above $1.35, notching its highest level versus the dollar since November 2011, thanks partly to repatriation flows and a smaller balance sheet for the European Central Bank.

Crude futures recover from early losses, as analysts weigh the possibility of a climb to $100-a-barrel oil. U.S. inventories data are on tap.

Gold futures climb, advancing modestly ahead of a policy statement due out from the Federal Reserve.

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Chesapeake CEO to step down on April 1 - Steubenville Herald Star

WHEELING - Leading the only active driller in Ohio, Brooke or Hancock counties, Chesapeake Energy Chief Executive Officer Aubrey McClendon acquired thousands of Marcellus shale acres for years of production.

In Ohio's Utica shale, McClendon authorized spending billions of dollars to acquire leases in counties such as Belmont, Jefferson, Harrison, Carroll and Tuscarawas, all in hopes that his company could produce natural gas, oil and natural gas liquids from the region.

However, when he took a 2.5 percent personal stake in these drilling operations - via his private firms such as Jamestown Resources and Larchmont Resources - some investors questioned whether McClendon should continue heading the Oklahoma City-based company that is publicly traded on the New York Stock Exchange.

Some local mineral owners also questioned Chesapeake's practice of acquiring leases that had been signed several years ago at rates of $5-$10 per acre - at a time when the going rate for new leases was as much as $5,000 per acre - and drilling wells before the $5-$10 leases could expire.

McClendon announced Tuesday he will retire as Chesapeake's chief executive officer and president on April 1, although he will remain as CEO until the company's board of directors appoints his replacement. McClendon has led the company since founding it in 1989.

"I am extremely proud of what we have built over the last quarter of a century, and I am confident that Chesapeake is in a great position to continue to grow and achieve great success in the future as it realizes the full value of its outstanding assets," McClendon said.

"Over the past 24 years, I have had the privilege of developing Chesapeake into one of the world's premier energy companies," he continued. "While I have certain philosophical differences with the new board, I look forward to working collaboratively with the company and the board to provide a smooth transition to new leadership for the company."

Chesapeake's board of directors continues reviewing McClendon's practice of taking the 2.5 percent stake in local drilling operations, formally known as the Founder Well Participation Program. McClendon has since agreed to end this practice by June 30, 2014. Noting the board has conducted an "extensive review" of the program, the company said McClendon has not engaged in any improper conduct.

McClendon also will resign his seat on the board once his CEO successor is appointed, but he will receive his full compensation and other benefits to which he is entitled in accordance with the terms of his employment agreement.

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The Rise And Shocking Fall of Energy Titan Aubrey McClendon - Business Insider

Rob Wile | Jan. 30, 2013, 10:28 AM | 7,153 |

Aubrey McClendon is out as CEO of Chesapeake Energy after turning a company he founded from scratch 30 years ago into the country's second-largest natural gas producer.

What happened? 

The short answer is the low natural gas prices destroyed the company's earnings.

The longer answer is that even before the natural gas glut, McClendon had loaded the company with debt at levels  analysts believed unsustainable. 

Then last year, Reuters' investigative reporters Anna Driver and Brian Grow said McClendon was borrowing massive loans from a company that also lends to Chesapeake, and using personal stakes in well profits as collateral.

We wanted to take a look at the undeniably fabulous life McClendon built for himself, and now must leave behind.

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Boeing Profit Beats; Sees No Impact From 787 Grounding - CNBC.com

Boeing Q4 Earnings Beat Estimates CNBC's Phil LeBeau breaks down the fourth quarter numbers on the aerospace giant; reporting EPS of $1.28 vs. $1.19 estimates, on revenues of $22.3 billion.

Analysts had expected Boeing to report $22.36 billion in revenue with earnings of $1.19 per share, according to a consensus estimate from Thomson Reuters.

For 2013, the company said it expects earnings per share, excluding items, of $6.10 to $6.30, and forecast capital expenditures of $2.3 billion to $2.5 billion.

Boeing said its current guidance for 2013 assumes no significant discount for the Federal Aviation Administration's 787 investigation into the lithium-ion batteries used on the aircraft that had experienced multiple problems and raised questions about their reliability. Boeing also said it is on track to produce 635 to 645 aircraft in 2013, including 60 787s.

"Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers," said Boeing Chief Executive Jim McNerney.

Boeing has been buffeted by a wide-ranging controversy surrounding the battery used by its 787 Dreamliner, which forced regulators to ground the aircraft. In November, the company announced a round of layoffs that would shave 30 percent of its management jobs and close several facilities in California.

Earlier Wednesday, Japan's two biggest airlines said they had repeatedly replaced sub-par lithium-ion batteries on their Dreamliners in the months before the two incidents that led to the 787 groundings.

On Jan. 16, the FAA ordered U.S. airlines to stop flying 787s, and other regulators around the world quickly followed suit.

The comments from All Nippon Airways, the biggest customer of the 787 to date, and Japan Airlines indicated problems with the battery's reliability long before one caught fire on a JAL 787 at Boston's Logan Airport on Jan. 7, and a second battery was badly charred and melted on an ANA domestic flight a few days later.

That flight was forced to make an emergency landing. The two airlines operate 24 of the 50 787s in service. United Airlines is the only U.S. carrier currently flying the 787.

"Batteries are a replaceable unit on airplanes, regardless of the technology used. Every day there are on the order of five or six batteries on Boeing airplanes that are removed and replaced — about 2,000 per year. We have an ongoing process to look for opportunities to extend the service life of replaceable units like batteries across our fleet," the company said in a statement Wednesday.

It added: "We have not seen 787 battery replacements occurring as a result of safety concerns. The batteries are being returned because our robust protection scheme ensures that no battery that has been deeply discharged or improperly disconnected can be used. The third highest category for battery returns is exceeding the battery shelf life — this is a fact of life in dealing with batteries; they sometimes expire and must be returned."

Boeing said that while it is continuing to build the Dreamliner, it has halted deliveries, and analysts have raised concerns about the cost of the grounding and fixing the battery problem on about 125 jets that Boeing has built so far.

—Reuters contributed to this report.

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Boeing focuses on 787 fix; profit tops estimate - Los Angeles Times

Boeing Co. said Wednesday that its top priority this year is fixing the battery problems that grounded its 787.

The company made the pledge while reporting a fourth-quarter profit that topped Wall Street estimates, as rising profits from commercial jets offset a smaller profit from defense work.

“Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers,” said Jim McNerney, Boeing's chairman, president, and CEO.

It's not clear how long that will take, and Boeing didn't make any predictions on Wednesday. The 787s are grounded while investigators try to figure out what caused two battery incidents earlier this month, including a fire on a plane parked in Boston.

U.S. aviation officials have asked Boeing for a full operating history of the batteries on the 787s. Japan's All Nippon Airways confirmed that it had replaced batteries on its 787 aircraft 10 times because they didn't charge properly or connections with electrical systems failed. Japan Airlines also said it had replaced 787 batteries.

Boeing is still building 787s even though deliveries are halted. It's still aiming to deliver at least 60 of the planes this year. That would keep it on pace for its current rate of building five per month. Boeing has said it wants to be building 10 787s per month by the end of this year.

Boeing said it expects to deliver 635 to 645 commercial jets this year, up from 601 deliveries in 2012, when it overtook Airbus for the first time since 2003. The European aircraft maker expects to deliver more than 600 planes this year.

Boeing earned $978 million in the latest quarter, or $1.28 per share. That was down 30 percent from a profit of $1.39 billion, or $1.84 per share, a year earlier, which included a big tax benefit of 52 cents per share.

The profit topped the $1.19 per share expected by analysts surveyed by FactSet.

Revenue rose 14 percent to $22.3 billion, matching analyst estimates.

Boeing Co. predicted 2013 earnings of $5 to $5.20 per share, with revenue of $82 billion to $85 billion. The outlook assumes “no significant financial impact” from the 787 being out of service.

Analysts had been expecting a 2013 profit of $5.17 per share on revenue of $88.13 billion.

For all of 2012, net income fell 3 percent to $3.9 billion, or $5.11 per share. Revenue rose 19 percent to $81.7 billion.

Last year's deliveries of its new 787 as well as its revamped 747-8 brought in cash — the 787 lists for more than $200 million each — but they actually hurt profits because the planes cost more to build than what Boeing collects. Profit margins for commercial planes shrank slightly, even as revenue rose 32 percent to $14.16 billion in the fourth quarter, and profits rose 29 percent to $1.27 billion.

Boeing is also faced with a slowdown in its defense business. Defense profits fell 13 percent to $751 million in the fourth quarter. Defense revenue fell 2 percent to $8.34 billion.

Shares of Chicago-based Boeing Co. rose 76 cents to $74.41 in premarket trading.

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airlines replaced 787 batteries 10 times before failure - Fox News

Published January 30, 2013

Associated Press

Jan. 17, 2013: This photo provided by the Japan Transport Safety Board shows the distorted main lithium-ion battery, left, and an undamaged auxiliary battery of the All Nippon Airways' Boeing 787.AP

TOKYO –  U.S. regulators said Wednesday they asked Boeing Co. to provide a full operating history of lithium-ion batteries used in its grounded 787 Dreamliners after Japan's All Nippon Airways revealed it had repeatedly replaced the batteries even before overheating problems surfaced.

National Transportation Safety Board spokesman Peter Knudson said the agency made the request after recently becoming aware of battery problems at ANA that occurred before a Jan. 7 battery fire in a 787 parked at Boston's Logan International Airport. Boeing has already collected some of the information, he said.

ANA said it had replaced batteries on its 787 aircraft some 10 times because they didn't charge properly or connections with electrical systems failed, and informed Boeing about the swaps. Japan Airlines also said it had replaced 787 batteries. It described the number involved as a few but couldn't immediately give further details.

All 50 of the Boeing 787s in use around the world remain grounded after an ANA flight on Jan. 16 made an emergency landing in Japan when its main battery overheated.

The 787 is the first airliner to make wide use of lithium-ion batteries. They are prone to overheating and require additional safeguards to prevent fires. However, ANA spokeswoman Megumi Tezuka said the airline was not required to report the battery replacements to Japan's Transport Ministry because they did not interfere with flights and did not raise safety concerns.

Having to replace batteries on aircraft is not uncommon and was not considered out of the ordinary, she said.

Laura Brown, a spokeswoman for the U.S. Federal Aviation Administration, said in Washington that the agency was checking whether the previous battery incidents had been reported by Boeing.

Boeing in Japan said it couldn't comment while the NSTB investigation is underway. GS Yuasa, the Kyoto, Japan-based manufacturer of the batteries, said it could not comment.

With 17 of the jets, ANA was Boeing's launch customer for the technologically advanced airliner. The airline has had to cancel hundreds of flights, affecting tens of thousands of people, but has sought to minimize disruptions by switching to other aircraft as much as possible.

The battery problems experienced by ANA before the emergency landing were first reported by The New York Times.

Japanese and U.S. investigators looking into the Boeing 787's battery problems shifted their attention this week from GS Yuasa to the manufacturer of a monitoring system. That company, Kanto Aircraft Instrument Co., makes a system that monitors voltage, charging and temperature of the lithium-ion batteries.

On Tuesday, the U.S. National Transportation Safety Board said it was conducting a chemical analysis of internal short circuiting and thermal damage of the battery that caught fire in Boston.

The probe is also analyzing data from flight data recorders on the aircraft, the NTSB said in a statement on its website.

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ADP shows improving labor market in January - MarketWatch

By Greg Robb, MarketWatch

WASHINGTON (MarketWatch) — Private-sector employment got off to a good start in 2013, according to a report from payroll-processing firm Automatic Data Processing Inc.

The U.S. added 192,000 private-sector positions in January, ADP estimated Wednesday, led by a 177,000 jump in the number of service-providing jobs.

“The job market is slowly but steadily improving,” said Mark Zandi, chief economist of Moody’s Analytics, which produces the report based on data supplied by ADP.

/conga/story/misc/dc.html 247471

The trend of job gains per month appears to have accelerated from near the 150,000 level to closer to 175,000, he said.

Economists polled by MarketWatch had expected the ADP data to show a gain of 173,000 jobs for the nation’s private sector.

Some analysts use ADP’s data to provide a hint about what the Labor Department’s employment report tracking nonfarm payrolls, due out Friday, may show. Investors pay close attention as well.

“The January [ADP] print is in line with our view of the solid underlying momentum in labor markets and would be in line with our expectation of a 150,000 rise in nonfarm payrolls and a drop in the unemployment rate to 7.7% in Friday’s BLS employment report,” said Cooper Howes, economist at Barclays Capital.

The ADP data was overshadowed by government data showing that the nation’s gross domestic product shrank 0.1% in the fourth quarter, confounding estimates. Read about how the recovery stalled late last year.

Stocks were down after the surprise drop in GDP. The Dow Jones Industrial Average /quotes/zigman/627449 DJIA -0.07%   was down 24 points to 13,929.

The health of the labor market is also a key factor in the deliberations on Federal Reserve monetary policy. The central bank will issue a statement later Wednesday at the end of a two-day meeting of the Federal Open Market Committee.

The policy-setting panel’s expected to continue to purchase mortgage-related bonds and Treasurys at a pace of $85 billion a month until there is a “substantial’ improvement in the labor market. See related story.

Applicants at job fair in New York City last month

Many economists are taking a wait-and-see approach on the question of whether the ADP data are a reliable precursor of the government’s data.

This is only the fourth such report since Moody’s replaced Macroeconomic Advisers as the compiler of the ADP data.

In December, ADP initially reported a gain of 215,000, a miss of 47,000 from the Labor Department’s subsequent private-payroll figure of 168,000.

Currently, analysts expect the Labor Department to report that nonfarm employment rose by 163,000 in January, compared with expansion by 155,000 jobs in December.

The news from December was not as good: ADP downwardly revised December’s result to a gain of 185,000 private-sector jobs from a prior estimate of 215,000.

The construction sector added 15,000 jobs in January. There were also job gains of 33,000 in the trade, transportation and utilities sector, 40,000 in professional and business services, and 12,000 in financial activities. Meanwhile, manufacturing lost 3,000 jobs.

Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000.

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Under Fire, Chesapeake Co-Founder to Depart - New York Times (blog)

Sean Gardner/ReutersAubrey K. McClendon faced scrutiny over how his finances mixed with his company’s.

9:15 p.m. | Updated

HOUSTON — Aubrey K. McClendon, Chesapeake Energy’s daring and innovative co-founder, will step down as chief executive on April 1 after months of scrutiny over how he mixed his personal finances and those of the corporation.

Mr. McClendon’s retirement, announced by the company on Tuesday, comes as the national boom in natural gas drilling, which he helped set in motion, is fading, diminishing Chesapeake’s prospects.

Over the past decade, Mr. McClendon aggressively explored for gas and outbid competitors in one shale field after another. Not only did his small Oklahoma company become the nation’s second biggest gas producer after Exxon Mobil, but Mr. McClendon also assembled a trophy room of assets that included a piece of the Oklahoma Thunder basketball team, a winery and a $12 million collection of antique maps.

In the end, a downturn in natural gas prices, caused in large part by the industry’s exuberant drilling, dealt a huge blow to the company’s balance sheet and to Mr. McClendon’s personal fortune.

Mr. McClendon borrowed heavily — more than $800 million — to finance his participation in an unusual compensation plan that allowed him to invest alongside his company in every well it drilled, sharing both in profits and expenses. Last year, the Securities and Exchange Commission opened an inquiry into Mr. McClendon’s finances, and a shareholder rebellion led to his removal as chairman in June and a reshuffling of the board.

Chesapeake, which borrowed extensively to finance its expansion spree, has been forced to unload $12 billion in valuable oil and gas fields over the last year as it tried to pay off its crushing debts. Last September, the company still had $19 billion in debt, according to Philip Weiss, a senior oil company analyst at Argus.

“He really built this company from nothing and made it into something meaningful,” Mr. Weiss said, “but in the end, I think it’s the right thing for the company and its shareholders” for him to leave. “The company needs a financial guy to bring spending under control.”

Investors appeared to agree, sending Chesapeake’s shares up more than 10 percent in after-hours trading.

The roots of Mr. McClendon’s sudden departure lay partly in a shake-up of Chesapeake’s board last summer, in which the company replaced more than half of its directors. Four of those board members were nominated by two major investors, Southeastern Asset Management and the investor Carl C. Icahn; an independent chairman was also appointed.

In recent weeks, Chesapeake’s board concluded that the company’s stock was suffering from Mr. McClendon’s presence, according to a person briefed on the matter. Shares in the company have fallen 14 percent over the last 12 months.

“Aubrey and the board have agreed that the time has come for the company to select a new leader,” Chesapeake’s chairman, Archie W. Dunham, said in a statement.

The company said the board’s review of Mr. McClendon’s financial dealings “to date has not revealed improper conduct.”

Mr. McClendon, 53, agreed to retire from the company on April 1 and will continue serving as chief executive until a successor is appointed.

“I am extremely proud of what we have built over the last quarter of a century,” he said in a statement. “While I have certain philosophical differences with the new board, I look forward to working collaboratively with the company and the board to provide a smooth transition.”

When gas prices were still high four years ago, Chesapeake’s stock price soared, and Mr. McClendon had a net worth of more than $1 billion. He bought homes in Hawaii, Colorado and Bermuda.

But as the price of gas fell by more than two-thirds over the last few years, Chesapeake lost more than two-thirds of its value as well.

Pressure on Mr. McClendon began last April after news reports revealed that he had obtained personal loans using minority stakes in company-owned wells as collateral. Reuters reported that he had personally borrowed more than $1 billion from EIG Global Energy Partners, a firm that also invested in Chesapeake, raising questions over conflict of interest.

Mr. McClendon was a larger-than-life figure in an industry filled with them. His dealings stretched across the globe as he negotiated partnerships with the Norwegian oil company Statoil, China’s CNOOC and France’s Total, shepherding the foreign oil giants into joint ventures in shale fields around the country.

“It’s an end of an era,” said Fadel Gheit, a senior oil analyst at Oppenheimer. “He was a maverick in the true sense of the word, and he represented both the good and the bad in corporate America. He was the risk-taker, a true visionary, but obviously there were excesses.”

Mr. Icahn, now one of the company’s largest shareholders, was generous in his praise.

“Aubrey has every right to be proud of the company he has built, the world-class team of people at Chesapeake and the collection of assets he has assembled, which in my opinion are the best portfolio of energy assets in the country,” he said.

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Boeing Profit View Meets Estimates as 787 Probe Drags - Businessweek

Boeing Co. (BA) predicted earnings (BA) that met analysts’ estimates this year, assuming no drag from the grounding of its marquee 787 Dreamliner jet that’s stretching into a third week while investigators examine battery faults.

Net income for 2013 will be $5 to $5.20 a share, based on an assumption of “no significant impact” from the 787’s woes, Chicago-based Boeing said today in a statement. That compares with an average estimate of $5.16 in a Bloomberg survey of 25 analysts (BA) and $5.11 in 2012.

Boeing gave the forecast still lacking a timetable for when Dreamliner deliveries can resume, clouding the future of the company’s most technologically advanced jet just 16 months after its debut. Regulators ordered airlines to park the 50 planes in service worldwide on Jan. 16 after a battery fire on one jet and an emergency landing by another.

“Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers,” Chief Executive Officer Jim McNerney said in the statement.

While deliveries have been halted, 787 production is continuing, Boeing said. The planemaker predicted shipments of more than 60 Dreamliners this year among a total of 635 to 645 commercial planes, up from 601 in 2012, as it increases airliner output more than 60 percent in the four years through 2014.

The forecast trailed an estimate of 663 deliveries this year from Jefferies Group Inc., noted Howard Rubel, a New York- based analyst with a buy rating on the stock.

“The biggest swing item will be the 787,” he said in a note. “Given the current production rate of five per month for the 787, coupled with aircraft coming out of rework, we believe this set the low-water mark.”

The light revenue guidance and lower-than-expected 787 deliveries are countered by a solid cash forecast, said Rob Stallard, an analyst with RBC Capital Markets in London who rates the stock outperform. Analysts including Stallard had expected Boeing to deliver about 93 Dreamliners this year.

Operating cash flow, which is driven by deliveries, was $7.5 billion last year and will be greater than $6.5 billion this year, Boeing said. Carriers pay about 60 percent of the price of a plane in installments after they place an order and the rest upon receiving the plane.

“Delivering at least 60 787s implies that we could stay at the current production rate of five a month and not necessarily ramp up to double production by the end of the year,” Christian Mayes, an analyst with Edward Jones & Co. in St. Louis, said in an interview today. “That might actually give suppliers more breathing room.”

Boeing rose 0.5 percent to $74.01 at 9:53 a.m. in New York. The shares previously had fallen 5.2 percent from Jan. 4, before the battery fire.

The planemaker introduced an earnings measurement today that it said will give investors a clearer picture of its underlying business by adjusting for market fluctuation of pension expense. On that basis, so-called core earnings this year will be $6.10 to $6.30 a share, compared with 2012’s $5.88.

Pension expense will probably be $3.2 billion this year, up from $2.5 billion in 2012, Boeing said. That’s less than the $3.5 billion estimate for 2013 the company gave in October. Boeing also has said it’s facing a tougher defense market this year as the Pentagon cuts spending.

Full-year profit fell 2.9 percent to $3.9 billion, or $5.11 a share, surpassing Boeing’s October forecast (BA) for earnings of $4.80 to $4.95 a share. Fourth-quarter net income (BA) fell 30 percent to $978 million, or $1.28 a share, compared with $1.39 billion, or $1.84 a year earlier, after a favorable tax settlement of 52 cents a share wasn’t repeated.

Sales jumped 14 percent to $22.3 billion in the quarter, from $19.6 billion a year earlier. Revenue will rise this year to a range of $82 billion to $85 billion, from a record $81.7 billion in 2012, Boeing projected.

Boeing is building five Dreamliners a month now with plans to double that figure by the end of this year. U.S. and Japanese authorities are trying to determine what caused the battery- fault warning that forced an All Nippon Airways Co. 787 to make the Jan. 16 emergency landing in Japan and sparked a fire in the lithium-ion packs on a Japan Airlines Co. jet in Boston on Jan. 7.

“If it’s a first-quarter event they could easily make it up in the rest of the year,” Ken Herbert, an analyst with Imperial Capital in San Francisco, said of the halted 787 deliveries in an interview before earnings were released.

Analysts and investors have been baffled in estimating how much the 787’s grounding will cost Boeing. The expense will depend on how long the fleet is parked, what fixes might be needed, and what compensation may have to be paid to customers and suppliers.

“There’s a lot they can’t comment on” because information is being controlled by the authorities, Mayes, who has a hold rating on the stock, said in an interview earlier this week. “That’s going to be a struggle, as investors want more information and they can’t give it.”

Orders surged 49 percent last year to 1,203 planes, the second-most in company history after Boeing began selling an upgraded version of its popular 737 single-aisle jet. That pushed the backlog to a record 4,373 aircraft valued at $319 billion, which represents more than seven years’ worth of work at current production plans.

The higher deliveries, along with development of several new derivatives of the 737, 777 and 787, may be at risk from a possible strike by engineers.

The Society of Professional Engineering Employees in Aerospace expects to decide tomorrow whether to ask members next week to authorize a walkout over Boeing’s plan to switch new hires to a 401(k)-style retirement plan, rather than the traditional pension.

Boeing’s defense division also faces a threat from sequestration, the $500 billion in automatic U.S. defense cuts set to go into effect March 1 unless lawmakers agree on an alternate deficit-reduction plan. The company is repositioning the military business with a goal of getting 30 percent of revenue from abroad, up from 24 percent in 2011.

The commercial unit’s fourth-quarter earnings rose 29 percent to $1.27 billion as sales gained 32 percent to $14.2 billion. The defense division posted a 13 percent drop in profit to $751 million as revenue fell 2 percent to $8.34 billion.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net.

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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