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Chesapeake Beats on Earnings & Revs - Analyst Blog

By: Zacks.com
Posted: 11/6/2013 4:06:00 PM
Referenced Stocks: CHK;NOG;TAT;XOM

Natural gas provider Chesapeake Energy Corp. ( CHK ) reported adjusted third quarter 2013 earnings of 43 cents per share, up over threefold from 10 cents in the year-earlier quarter and a penny above of the Zacks Consensus Estimate. The outperformance came on the back of improved liquids production and higher price realization.

Total revenue improved nearly 64% to $4,867.0 million from $2,970.0 million a year ago. The top line also got the better of the Zacks Consensus Estimate of $1,781.0 million.

Operational Performance

Chesapeake's average daily production in the quarter increased 6.3% year over year to 372 billion cubic feet of natural gas equivalent (Bcfe), of which natural gas accounted for 73%. The percentage of natural gas production to total volume decreased 6% points on an annualized basis. However, natural gas production declined 9.6% to 273 billion cubic feet (Bcf) from 302 Bcf, while oil production expanded 22.2% from the year-ago level.

Natural gas equivalent realized price in the reported quarter was $4.78 per thousand cubic feet equivalent (Mcfe), up 18.3% from $4.04 in the year-earlier quarter. Average realizations for natural gas were $2.26 per Mcf compared with $1.97 per Mcf in the year-earlier quarter. Liquids were sold at $92.09 per barrel, up 1.4% from the year-ago price of $90.79 per barrel.

On the cost front, production expenses decreased 9.5% from the year-earlier level to 76 cents per Mcfe.

Financials

At the end of the quarter, Chesapeake − the largest U.S. natural gas producer after ExxonMobil Corporation ( XOM ) − had a cash balance of $987 million. The debt balance stood at $12,736 million, representing a debt-to-capitalization ratio of 41.0%. Operating cash flow increased 42.9% year over year to $1,356.0 million.

Guidance

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 year.

Chesapeake expects 2013 total production in the band of 1,440-1,468 Bcfe. Natural gas is expected to contribute 1,080-1,090 Bcf 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.

For 2013, Chesapeake decreased its drilling, completion and leasehold capital expenditure outlook by $300 million to $5.700-$6.050 billion.  

Zacks Rank

Chesapeake holds a Zacks Rank #3 (short-term Hold rating). However, there are Zacks Ranked #1 (Strong Buy) stocks in the oil and gas industry like TransAtlantic Petroleum Ltd ( TAT ) and Northern Oil and Gas, Inc. ( NOG ) that appear attractive in the short term.



CHESAPEAKE ENGY (CHK): Free Stock Analysis Report

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EXXON MOBIL CRP (XOM): Free Stock Analysis Report

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