Chesapeake Energy Corp. (CHK) will record a $1.8 billion writedown on its natural gas and oil assets because of a drop in energy prices.

Oklahoma City-based Chesapeake, the largest producer of U.S. natural gas by volume, joins oil major ConocoPhillips (COP) and refiner Valero Energy Corp. (VLO) in writing down assets that are no longer worth as much as once thought.

Earlier this month, Conoco Phillips said it will take several one-time charges totaling $34 billion in the fourth quarter and Valero (VLO) said Tuesday it will record a $4.1 billion writedown of goodwill on assets acquired when profit margins were bigger.

In a separate announcement, Chesapeake also said it would make a public offering of $500 million in senior notes and apply the proceeds to pay down bank debt.

Chesapeake will also adjust its hedging position to protect against declines in natural gas prices. It modified its hedging position from December and plans to eliminate virtually all 2009 "knockout" swaps. The company said it may decrease or increase its hedging position, depending on changes in the natural gas and oil futures markets.

"We will continue to carefully manage our corporate liquidity and capital spending levels to protect value and safely navigate the current challenging economic environment," Aubrey McClendon, chief executive of Chesapeake, said in a statement.

In recent months, Chesapeake has seen its share price plummet along with the steep decline in natural gas prices. Natural gas prices have fallen more than 65% from a July peak of $13.694 a million British thermal units. Shares of the energy company have followed suit, falling from a summer peak of $74 apiece. Shares were down 5.37% to $14.80 in after hours trading.

In response to falling commodity prices and tightening credit markets, Chesapeake cut its production-growth forecast, idled rigs, pared back spending and drew down its credit facility.

The company also reported Tuesday that its fourth quarter daily production of natural gas equivalent averaged 2.32 billion cubic feet, flat from the third quarter and an increase of 4% from a year ago. The average daily production consisted of 2.13 billion cubic feet of natural gas and 30,956 barrels of oil and natural gas liquids.

Chesapeake estimates year-end proven reserves totaled 12.1 trillion cubic feet of natural gas equivalent, an increase of 11% from last year.

-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com

-By John Kell, Dow Jones Newswires; 201-938-5285; john.kell@dowjones.com

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