Chesapeake Energy Corp.
) has completed the divestment of 100% of its ownership interest
in Chaparral Energy, Inc. The deal closed for gross proceeds of
$215 million. This sale is compatible with the company's current
focus of refinement and building up a portfolio around core
Chesapeake - an independent oil and gas company - registered
higher production on lower operating costs from its underlying
assets during the third quarter.
Heavy investments in the development of Chesapeake's liquids-rich
holdings in the Eagle Ford Shale, Granite Wash and Mississippi
Lime are lined up. Most importantly, the company's efforts to
produce desirable results are reflected by an almost 22%
year-over-year increase in oil production during the third
As the company shifts its focus to more liquid-rich plays, it
expects natural gas production to fall in 2013, while liquids
production is expected to increase approximately 28-34% year over
Chesapeake expects 2013 total production in the band of
1,440-1,468 billion cubic feet equivalent (Bcfe). Natural gas is
expected to contribute 1,080-1,090 billion cubic feet to the
total production. Oil production forecast has been increased to
40-42 million barrels/MMBbls from 38-40 MMBbls projected
previously, and NGL will likely be in the 20-21 MMBbls range.
Chesapeake is on track with its plan of reducing long-term debt
by monetizing its assets and cutting lease-hold spending. This
monetization initiative is mainly aimed at coping with the
mounting debt level as well as filling the funding gap for its
2014 expenditures that resulted from volatile natural gas prices.
However, Chesapeake's results are particularly vulnerable to
fluctuations in the natural gas market, since natural gas
accounted for about three-fourth of Chesapeake's first nine
months of 2013 production.
Chesapeake currently holds a Zacks Rank #3 (Hold), implying that
it will perform in line with the broader U.S. equity market over
the next one to three months.
Meanwhile, one can consider better-ranked players in the oil and
gas sector like
Seadrill Partners LLC
Ocean Rig UDW Inc.
Helmerich & Payne Inc.
). Seadrill Partners sports a Zacks Rank #1 (Strong Buy), while
Ocean Rig and Helmerich & Payne carry a Zacks Rank #2
CHESAPEAKE ENGY (CHK): Free Stock Analysis
HELMERICH&PAYNE (HP): Free Stock Analysis
OCEAN RIG UDW (ORIG): Free Stock Analysis
SEADRILL PTNRS (SDLP): Free Stock Analysis
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