Natural gas provider Chesapeake Energy Corp. (
CHK ) reported
adjusted first quarter 2013 earnings of 30 cents per share, up 67%
year over year and ahead of the Zacks Consensus Estimate of 24
cents. The outperformance came on the back of improved oil
production.CHESAPEAKE ENGY (CHK): Free Stock Analysis
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Total revenue improved 41.5% to $3,424.0 million from $2,419.0
million a year ago. The top line also got the better of the Zacks
Consensus Estimate of $1,877.0 million.
Chesapeake's average daily production in the quarter increased
7.5% year over year to 358 billion cubic feet of natural gas
equivalent (Bcfe), of which natural gas accounted for 76%. The
percentage of natural gas production to total volume decreased 5%
points on an annualized basis. However, natural gas production grew
0.7% to 273 billion cubic feet (Bcf) from 271 Bcf, while oil
production expanded 54.5% from the year-ago level.
Natural gas equivalent realized price in the reported quarter was
$4.46 per thousand cubic feet equivalent (Mcfe), up 10.9% from
$4.02 in the year-earlier quarter. Average realizations for natural
gas were $2.13 per Mcf compared with $2.35 per Mcf in the
year-earlier quarter. Liquids were sold at $94.85 per barrel, up
2.4% from the year-ago price of $92.63 per barrel.
On the cost front, production expenses decreased 18.1% from the
year-earlier level to 86 cents per Mcfe.
At the end of the quarter, Chesapeake − the largest U.S. natural
gas producer after ExxonMobil Corporation ( XOM ) − had a cash
balance of $33 million. The debt balance stood at $13,449 million,
representing a debt-to-capitalization ratio of 42.7%. Operating
cash flow increased 237.2% year over year to $924.0 million.
As the company shifts its focus to more liquid-rich plays, it
expects natural gas production to fall approximately 7% in 2013,
while liquids production is expected to increase approximately
Chesapeake expects 2013 total production in the band of
1,420-1,474 Bcfe. Natural gas is expected to contribute 1,060-1,090
Bcf to the total production. Oil production forecast is 37-39
million barrels/MMBbls and NGL will likely be in the 23-25 MMBbls
During 2013, Chesapeake aims to spend approximately 86% of its
total drilling and completion capex in liquids-rich plays. The
company also plans to invest heavily in the development of its
holdings in the Eagle Ford Shale, Granite Wash and Mississippi
Chesapeake retains a Zacks Rank #3 (short-term Hold rating).
However, there are other Zacks Ranked #1 (Strong Buy) stocks in the
oil and gas industry like Harvest Natural Resources
Inc. ( HNR
), and EPL Oil & Gas, Inc. ( EPL ) that appear more
attractive in the short term.