Chesapeake Energy: Strong Production Gains Push Stock Near 52-Week High

Chesapeake Energy Corporation (CHK) is trading near a 52-week high after delivering a better-than-expected fourth quarter. Wall Street earnings forecasts are on the rise. Full-year 2008 estimates of $3.51 per share climbed from last month’s $3.38. CHK’s earnings per share are expected to grow 15% over the next 3 – 5 years, versus industry’s average of 10%.

Chesapeake Energy Corporation is the largest independent and third-largest overall producer of natural gas in the U.S. Headquartered in Oklahoma City, the company's operations are focused on exploratory and developmental drilling and corporate and property acquisitions.

The company is known for growth through acquisitions, and is the most active driller of new wells in the U.S. On January 9, Chesapeake announced that it has agreed to acquire about 8,600 acres of Barnett Shale leaseholds in the Tarrant and Johnson counties of North Texas from Paloma Barnett LLC.

Aubrey K. McClendon, Chesapeake’s Chief Executive Officer, commented,

We are excited to announce our new leasehold acquisition and LSA with Paloma and its owners. With our own landmen and lease brokers teamed up with the Paloma, Western, Dale and Four Sevens leasing teams, we will be able to continue acquiring a steady stream of valuable leasehold in Tarrant, Johnson and western Dallas counties that will provide Chesapeake with substantial growth opportunities for years to come.

In addition, we are pleased to announce that our 2007 gross production exit rate from the Barnett Shale was 600 mmcfe per day (400 mmcfe per day net). This compares very favorably to our 2006 gross production exit rate of 250 mmcfe per day and we now will focus on achieving our 2008 gross production exit rate target of 900 - 1,000 mmcfe per day.

Chesapeake's production growth has been at or near the top of the industry for several years. After increasing 23% last year, volumes are expected to grow around 20% this year and in the mid-teens level in 2009.

CHK is trading near a 52-week high after delivering a reported better-than-expected fourth quarter as well as the full year. Chesapeake noted that 2007 results reflected strong production gains.

Fourth quarter earnings totaled 93 cents per share, compared to 90 cents per share in the prior-year period. The result came in 15% ahead of the consensus estimate.

Wall Street earnings forecasts are on the rise. Full-year 2008 estimates of $3.51 per share climbed from last month’s $3.38. For 2009, projections of $3.13 per share stand above the prior month’s $3.07. CHK’s earnings per share are expected to grow 15% over the next 3 – 5 years, versus industry’s average of 10%.

In addition to exhibiting solid growth, this Growth & Income pick offers a dividend yield of 0.6%, which higher than the industry averages as oil and gas companies do not generally pay dividends.

The company’s return on equity [ROE] of 18% also tops the industry’s average of 11%. Its net margin of 18.6% compares favorably to the industry’s average of 15.8%.

Comments

[cynicalandisgusted]

Perhaps you could have taken a moment to point out that the analysts expectations have historically been low. This trend is still firmly in place.

Last year they made 3.20 and a 15% increase would be 3.68. A further 15% for 2009 leads to 4.23 - a far cry from 3.13.