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.
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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.