Natural gas provider
Chesapeake Energy Corp.
) reported adjusted second quarter 2013 earnings of 51 cents per
share, up over sevenfold from 6 cents in the year-earlier quarter
and ahead of the Zacks Consensus Estimate of 39 cents. The
outperformance came on the back of improved oil production and
higher price realization.
Total revenue improved nearly 38% to $4,675.0 million from
$3,389.0 million a year ago. The top line also got the better of
the Zacks Consensus Estimate of $1,804.0 million.
Chesapeake's average daily production in the quarter increased
6.3% year over year to 369 billion cubic feet of natural gas
equivalent (Bcfe), of which natural gas accounted for 75%. The
percentage of natural gas production to total volume decreased 4%
points on an annualized basis. However, natural gas production
grew 1.1% to 278 billion cubic feet (Bcf) from 275 Bcf, while oil
production expanded 43.9% from the year-ago level.
Natural gas equivalent realized price in the reported quarter was
$4.96 per thousand cubic feet equivalent (Mcfe), up 31.6% from
$3.77 in the year-earlier quarter. Average realizations for
natural gas were $2.62 per Mcf compared with $1.88 per Mcf in the
year-earlier quarter. Liquids were sold at $93.81 per barrel, up
2.4% from the year-ago price of $91.58 per barrel.
On the cost front, production expenses decreased 19.6% from the
year-earlier level to 78 cents per Mcfe.
At the end of the quarter, Chesapeake − the largest U.S. natural
gas producer after
) − had a cash balance of $677 million. The debt balance stood at
$13,057 million, representing a debt-to-capitalization ratio of
41.8%. Operating cash flow increased 71.9% year over year to
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
1,434-1,478 Bcfe. Natural gas is expected to contribute
1,080-1,100 Bcf to the total production. Oil production forecast
is 38-40 million barrels/MMBbls, and NGL will likely be in the
21-23 MMBbls range.
During 2013, Chesapeake aims to spend approximately 86% of its
total drilling and completion capex on 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 Zacks Ranked #1 (Strong Buy) stocks in the oil
and gas industry like
Gulfmark Offshore, Inc.
) that appear attractive in the short term.
CHESAPEAKE ENGY (CHK): Free Stock Analysis
DRIL-QUIP INC (DRQ): Free Stock Analysis
GULFMARK OFFSHR (GLF): Free Stock Analysis
EXXON MOBIL CRP (XOM): Free Stock Analysis
To read this article on Zacks.com click here.