Independent oil and gas company,
Chesapeake Energy Corporation
) is set to release second-quarter 2014 financial numbers before
the opening bell on Aug 6, 2014. Let's see how things are shaping
up prior to the announcement.
In the last quarter, the company's earnings of 59 cents per share
almost doubled year over year from 30 cents and surpassed the Zacks
Consensus Estimate of 47 cents. The results were boosted by both
higher price realizations and volume. Quarterly revenues also
improved to $5,046.0 million from $3,424.0 million a year ago. The
top line also got the better of the Zacks Consensus Estimate of
Factors Influencing This Past Quarter
Chesapeake, the second largest U.S. natural gas producer after
ExxonMobil Corp. (
), is gradually shifting its focus to more liquid-rich plays. The
company earlier raised its 2014 total production growth outlook on
an adjusted basis to 9-12% from 8-10%, to reflect
higher-than-expected natural gas liquids volumes. It expects
natural gas production to fall in the second quarter of 2014, while
liquids production is expected to increase approximately 25-29%
year over year. The growth drivers were higher-than-expected oil
output from the Eagle Ford as well as gas yield from the Marcellus
and improved liquids volumes.
Chesapeake remains one of the industry's most active players in
managing asset portfolio through a combination of acquisitions and
disposals. With the biggest inventory of unconventional resource
potential than probably any other domestic independent, Chesapeake
boasts a leading position among the top unconventional liquids-rich
plays, comprising Eagle Ford, Utica, Granite Wash, Cleveland,
Tonkawa, Mississippi Lime and Niobrara and in the Marcellus,
Haynesville/Bossier and Barnett natural gas shale plays.
For 2014, Chesapeake expects capital expenditure of $5,200-$5,600
million. We appreciate Chesapeake's initiative of deploying more
funds toward liquids. Given the downtrend in
, the company intends to deploy the majority of its capex to drill
liquids-rich plays in the near future. It plans to invest heavily
in the development of its holdings in the Eagle Ford Shale, Granite
Wash and Mississippi Lime.
Our proven model does not conclusively show that Chesapeake is
likely to beat earnings this quarter because a stock needs to have
both a positive
and a Zacks Rank of #1, 2 or 3 for that to happen. It is not the
case here, as you will see below.
Chesapeake has an Earnings ESP of -6.82%. This is because the Most
Accurate estimate stands at 41 cents while the Zacks Consensus
Estimate is pegged higher at 44 cents.
Chesapeake carries a Zacks Rank #3 (Hold) which increases the
predictive power. However, we need to have a positive ESP to be
confident about an earnings surprise.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions.
Other Stocks to Consider
Energy stocks that have both a positive ESP and a favorable Zacks
Eagle Rock Energy Partners LP (
), Earnings ESP of +28.57% and a Zacks Rank #1 (Strong Buy).
Laredo Petroleum, Inc. (
), Earnings ESP of +5.88% and a Zacks Rank #2 (Buy).
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