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Earnings Review: Powder River Basin A Big Part Of Chesapeake Energy's Liquids Upside
- Chesapeake Energy is going strong in the Powder River Basin, boosting its output sequentially by 16%.
- Going forward, Chesapeake plans to test out the stacked potential of the Niobrara formation in Wyoming.
- Formations formed during the Upper Cretaceous period, including the Sussex, Shannon, Teapot, and Parkman plays, are also being tested out this quarter.
- The Powder River Basin could end up yielding close to 2 billion BOE of oil weighted hydrocarbons for Chesapeake, making it a big part of its liquids push.
Chesapeake's $5.4 Billion Sale Likely To Improve Financial Outlook
- Chesapeake held nearly $11 billion in debt by the end of the second quarter. It had aims to reduce leverage by nearly 20% by the end of the year.
- It was able to strike a deal with its rival, Southwestern Energy Corp, for the sale of it Marcellus and Utica shale areas for nearly $5.38 billion.
- The gains from this deal could lead to lowering of debt levels, lower interest payments, more dividends, lower financial costs etc.
- Moody’s upgraded the rating for Chesapeake following the announcement of the deal, on the basis of improved financial outlook.
- Investment in shares still seems risky as there is more reason to believe that share price erosion is possible in the future.
Update: Operational Efficiency And Financial Control Are Key For Chesapeake's FutureIAEResearch • Sat, Nov. 8
- The company announced its third quarter earnings.
- The results are in line with our expectations as we have said in the past that increased efficiency and better operations will allow the company to grow.
- As the commodities markets make a recovery, we believe Chesapeake will benefit massively and it should prove to be a solid long-term investment.
- Chesapeake’s production reached its guidance for the third quarter.
- The company revised up its annual production.
- The company’s unrealized gains from its oil contracts drove its revenue higher.
Low Gas Prices Could Be Offset By Higher Volumes For Chesapeake
- For the 2nd quarter of 2014, Chesapeake Energy reported revenues of $5.15 billion, down almost 57% from $8.1 billion in the second quarter of the previous year.
- For the 3rd quarter of 2014, Chesapeake Energy’s revenues are forecasted at $4.84 billion, compared to $4.87 billion in the 3rd quarter of 2013.
- Besides the sales of assets, the company’s financial performance over the quarter will also be affected significantly by the falling natural gas prices.
- Despite facing an adverse market environment and falling prices for its core product base, Chesapeake Energy Corporation has improved its position from where it stood 3 years ago.
- The current downward trend in Chesapeake’s prices might actually represent an ideal entry point for investors with gas prices expected to increase accordingly with demand stabilization.
Chesapeake's Third Quarter Earnings To Be Announced - What Should Investors Expect?
- Revenues for the second quarter increased by 10% but did not translate into higher earnings as operating costs surged.
- Earnings for the quarter declined by nearly 66% relative to the second quarter’s earnings for the previous year.
- The second quarter witnessed a rise in production. This rise in production is likely to continue.
- Chesapeake is working on divesting from assets to improve its holding and debt structure, and also improve on its operations.
- Oil and gas price volatility could weigh down future top lines, despite increases in production.
- Chesapeake is one of the most affected companies due to the recent fall in commodity prices.
- The long-term demand outlook of the sector is favorable, which should result in a sustained recovery in the crude prices.
- The company has achieved a good business mix, which should result in better operational performance and a strong financial position.
- OPEC meeting at the end of the month is important, as the OPEC members will likely announce a decrease in crude supply.
Chesapeake Energy Q3 Earnings Preview: Debt And The Powder River Basin
- Chesapeake Energy has a chance to finally shed the burden of its past and achieve an investment-grade rating.
- The Powder River Basin offers Chesapeake a lot of liquids upside that is oriented towards crude and condensate.
- Management should update investors with the production results of at least two new wells targeting the Sussex interval, which could have big implications for the company.
Chesapeake Energy Sold $5.375B In Assets, Its Debt Should Be Investment Grade Soon, It's A Buy
- CHK sold 413,000 net acres of Marcellus and Utica acreage to Southwestern Energy Company for $5.375B.
- This should help it to appreciably reduce its approximately $12.2B in debt. If you subtract its $1.46B in cash, net debt was only about $10.7B before the deal.
- With the many reasons for US natural gas demand to go up in the next few years, #2 US natural gas producer CHK's stock should go up too.
- CHK is also well hedged, so the recent sell off mediated mostly by the oil price decline is overdone.
Chesapeake Energy: It Just Doesn't Pay To Follow Mr. Market
- Chesapeake Energy's share price has fallen off a cliff.
- Shares are down a massive 33% from their 52-week high.
- Despite Mr. Market's erratic behavior, I think this extreme and unwarranted pullback makes for an excellent purchase opportunity.
- Asset sales, investment spending control and deleveraging are strategic moves that have dramatically de-risked Chesapeake Energy.
- Chesapeake Energy reaffirmed its adjusted production guidance for 2015.
- I have recently added some additional shares in Chesapeake Energy. The company continues to reduce its debt load and transform into a more focused E&P play.
- This transformation was accelerated this week with a major asset divestiture. Insiders have also been big buyers of the stock in 2014.
- The shares looks undervalued both on a book and net asset value basis. The stock are also almost 50% below the median price target held by 24 analysts on it.
- Chesapeake Energy recently sold assets in West Virginia to Southwestern Energy for $5.4 billion.
- This sale will mostly reduce its natural gas operations.
- What are the benefits for the company from this sale?
Update: Chesapeake Sells Assets In The Southern Marcellus And Utica Shale
- The company announced the sale of assets in the southern Marcellus and Utica Shale.
- The sale is in line with Chesapeake's strategy of reducing natural gas production volumes.
- We maintain that the company is on track and it will continue to reshuffle its product mix.
Update: Chesapeake Energy Raises $5.375 Billion By Selling Part Of Its Marcellus And Utica Operations To Southwestern Energy
- Chesapeake Energy's stock shot up 17% on Thursday when it announced that it had sold $5.375 billion worth of assets to Southwestern Energy Company.
- Chesapeake is unloading 413,000 net acres in Northern West Virginia and Southern Pennsylvania, which is capable of targeting the Utica and Marcellus formations.
- While Chesapeake is missing out on the growth opportunities the acreage would offer, it's a necessary move to reduce its leverage and focus its cash on core areas.
Chesapeake Energy: Marcellus South Sale Highlights Sum-Of-The-Parts Value
- The $5.4 billion divestiture of the Marcellus South addresses leverage concerns and delivers an adequate value for a major asset in the portfolio.
- The transaction is logical in the context of Chesapeake’s asset-rich but capital-poor situation.
- The divestiture may not be the last strategic step that the company may decide to pursue.
- The recent large slide in Chesapeake Energy appears unwarranted with the company still focused on natural gas production.
- Natural gas inventories are filling the gap, but the numbers remain below the five-year average with the injection season coming to an end.
- The improving economics of the Haynesville Shale places Chesapeake Energy in a prime location to benefit from Gulf Coast natural gas demand.
Chesapeake Energy: Fundamental Strength And Improving Production Profile Make It A Smart Investment
- Chesapeake Energy missed earnings estimates the last time, but the company is undertaking efforts to cut costs.
- Chesapeake's fundamentals are strong, and is earnings are expected to grow at a good pace in the next two years.
- Chesapeake is expanding its production profile to tap the growing consumption of natural gas.
There Are A Lot Of Positives For Chesapeake Energy, Including A Major Technical Support
- Chesapeake Energy increased production in Q2 2014 by 13% year over year.
- However, it saw EBITDA and adjusted EBITDA fall significantly as prices of oil and natural gas fell.
- CHK has huge assets in some of the most prolific unconventional fields in the US (12+ million acres).
- CHK has reduced its net debt to approximately $10B, which has been a milestone for some time.
- Lower than normal natural gas stores and a likely El Nino winter may lead to higher natural gas prices this winter. The fundamentals should help CHK make a technical bounce.
Chesapeake Energy: Barron's Thinks Earnings Can Double Over Next Few Years
- I have been reading Barron's for thirty years and the magazine consistently provides a good flow of starting points for possible new investments.
- This week's magazine has a couple of positive paragraphs on the investment case for owning Chesapeake Energy. An opinion I share as I recently purchased the stock.
- This energy producer's stock is cheap compared with peers, the company is set to make dramatic operational improvements and earnings could more than double over the next four years.
- Chesapeake Energy has dropped in the last three months, as the company reported a big decline in its bottom line.
- Chesapeake, however, should deliver a better performance going forward, on the back of a strong production outlook and improved pricing.
- Chesapeake's fundamentals are robust, and its bottom line is expected to grow in the coming five years, making it a good bet on the dip.
Yesterday, 10:44 AM
- A federal appeals court says Chesapeake Energy (CHK -1.1%) had no right to redeem $1.3B of notes early because it waited too long to tell investors of its plans, reversing a 2013 ruling by a district court.
- The 2-1 decision agrees with Bank of New York Mellon, the notes' trustee, that the notice from CHK to redeem its 6.775% notes maturing in 2019 was untimely, referring the case back to the district court.
Thu, Nov. 6, 2:33 PM
- Chesapeake Energy (CHK -0.3%) discloses that it has received subpoenas from the U.S. Justice Department and states seeking information on its royalty payment practices to mineral owners.
- CHK is facing several lawsuits from landowners and others who say it has underpaid royalties for natural gas and natural gas liquids through the use of improper deductions or below-market pricing.
- CHK, which also is being probed by the DoJ and states over possible antitrust violations related to land purchases, says it is responding to the subpoenas.
Wed, Nov. 5, 7:21 PM
- U.S. companies in shale fields from North Dakota to Texas are talking tough in the face of Saudi Arabia's price war, believing they have more staying power than many of the OPEC partners.
- “Saudi Arabia is really taking a big gamble. If they take the price down to $60-$70, you will see a slowdown in the U.S. but you’re not going to see it stop. The consequences for other OPEC countries are far more dire," says Chesapeake Energy (NYSE:CHK) chairman Archie Dunham.
- Execs at several large U.S. shale producers, including CHK, EOG Resources (NYSE:EOG) and Whiting Petroleum (NYSE:WLL) said as they reported earnings that they plan to maintain and even raise production.
- Shale producers cite success in reducing costs as proof they can still be profitable at prices below $70/bbl; CHK says well costs at its two largest production areas - Pennsylvania’s Marcellus Shale and Texas' Eagle Ford - fell 11% and 13% respectively Y/Y during the first seven months of this year.
- But not all shale is alike: Bakken and Permian producers need prices at ~$67 and $65, respectively, to make drilling worthwhile, according to ITG Investment Research, while producers at the Cana Woodford shale in Oklahoma need $100 to make a profit, and $79 is the threshold at the Anadarko formation on the Texas-Oklahoma border.
Wed, Nov. 5, 3:48 PM
- Chesapeake Energy's (CHK +6.7%) balance sheet is "close to being fully healed," Sterne Agee analyst Tim Rezvan exults after CHK's strong Q3 results, reduced expenses and the $5.4B sale of western Marcellus acreage expected to close this quarter.
- CHK’s focus on expense reduction was evident quantitatively in terms of the lowest all-in unit expense number since Q3 2010, and qualitatively with sharply lower well costs across all core operating areas, according to Rezvan.
- The company's "mantra of operational efficiency is being reflected at the field level, and CEO Doug Lawler's push to drive costs down appears to have more room to run," Rezvan writes.
Wed, Nov. 5, 9:17 AM
- Chesapeake Energy (NYSE:CHK) +3.8% premarket after Q3 earnings easily beat Wall Street estimates, posting a 17% Y/Y increase in revenues driven by 48% revenue growth in its natural gas, oil and natural gas liquid segment as production increased.
- Q3 production averaged 725.6K boe/day, up 11% Y/Y, adjusted for asset sales; oil production rose 5% to 118.9K bbl/day, production of natural gas liquids jumped 14% to 95.9K bbl/day, and natural gas production gained 3% to 3.1B cf/day.
- Analysts at Tudor Pickering Holt had estimated CHK's Q3 production at 704K boe/day, and characterize the results as a "strong beat."
- For the full year, CHK estimates production to rise 9%-12%, with liquids production up 29%-33%, oil production up 11%-15%, NGL production up 63%-68%, and natural gas production up 4%-6%. The daily equivalent total is expected to be 695 million to 705 million barrels a day.
Wed, Nov. 5, 7:02 AM| Comment!
Tue, Nov. 4, 5:30 PM
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Fri, Oct. 24, 11:33 AM
- Chesapeake Oilfield Services has withdrawn its IPO registration filing. An S-1 was filed for Chesapeake's (CHK -0.8%) oilfield services ops, then known as Chesapeake Oilfield Services, back in April 2012. Chesapeake later changed the name to Seventy Seven Energy.
- This summer, Chesapeake finished the spinoff of Seventy Seven Energy into a separate, publicly-traded company.
Wed, Oct. 22, 11:49 AM
- Chesapeake Energy (CHK +3.3%) is upgraded to Buy from Neutral with a $27 price target, up from $24, at UBS, which says new CEO Doug Lawler has removed most of the firm's bear arguments concerning high leverage, lack of transparency, and material free cash flow outspend.
- CHK's turnaround is not reflected in discounted valuation, the firm says, adding that high leverage has been reduced, visibility has increased, and free cash flow deficit has been narrowed.
- Given CHK's strong liquidity, below average oil inventory and attractive market valuations, UBS believes CHK may pursue an acquisition targeting oil-weighted U.S. resource assets.
Fri, Oct. 17, 4:54 PM
- Chesapeake Energy (NYSE:CHK) is on the cusp of gaining an investment grade rating for the first time after announcing yesterday that it was selling natural gas and oil shale fields for nearly $5.4B.
- Moody’s and S&P both gave “positive” outlooks on CHK’s ratings which are one step from investment grade on each firm’s ratings scale.
- Yesterday's deal will provide CHK "with sufficient wherewithal to reduce financial leverage to a greater extent than assumed in our base-case scenario,” S&P says, adding that an upgrade could result if debt is reduced by more than $5B.
- CHK had ~$16.7B in total debt and preferred stock at the end of June.
Thu, Oct. 16, 3:36 PM
- Southwestern Energy (SWN -10.6%) appears to be paying a steep price to buy $5.375B in high quality Appalachia assets from Chesapeake Energy (CHK +16.7%); SunTrust estimates SWN paid $9,625/acre for the land, when previous deals in West Virginia had come in below $5K/acre and the sharp decline in commodity prices over recent months.
- Stock investors clearly think CHK got a great deal, which is boosting shares of other West Virginia players such as Magnum Hunter (MHR +9.9%), Gulfport Energy (GPOR +6.7%) and Consol Energy (CNX +2.5%).
- Topeka Capital believes MHR has superior assets in the core Utica and Marcellus, and an average of the transaction metrics on MHR's production and acreage implies upside of 39.2%; with its scale in the area, the firm thinks MHR makes for an attractive takeout over the next 12 months.
Thu, Oct. 16, 9:13 AM
Thu, Oct. 16, 7:24 AM
- Chesapeake Energy (NYSE:CHK) +2.7% premarket after agreeing to sell assets in the southern Marcellus Shale and eastern Utica Shale to Southwestern Energy (NYSE:SWN) for $5.375B.
- The sale includes ~413K net acres and ~1,500 wells in northern West Virginia and southern Pennsylvania; average net daily production from the properties was ~56K boe in September, with net proved reserves of ~221M boe.
- CHK says it expects FY 2015 production guidance to remain in the range of 7%-10% growth Y/Y adjusted for asset sales.
Mon, Sep. 22, 7:05 AM
Fri, Sep. 12, 11:14 AM
- Chesapeake Energy's (CHK -1.3%) stock price target is cut to $30 from $35 at Oppenheimer to reflect a weaker natural gas price outlook.
- The firm expects CHK's stock performance to reflect management's ability to deliver on its strategic objectives of creating value through capital efficiency and superior operating performance, while strengthening and simplifying the balance sheet and growing production and cash flow.
Tue, Sep. 9, 2:18 PM
- Chesapeake Energy (CHK +0.5%) must face trial on charges of felony racketeering and using false pretenses related to its land-leasing practices, a Michigan state judge rules.
- The Michigan AG brought the charges against CHK in June, alleging the company directed its agents to lock up land positions in the state during the state's 2010 oil and gas leasing boom by offering signing bonuses to private landowners.
- CHK says it believes the charges are without merit and expects to prevail at trial.
CHK vs. ETF Alternatives
Chesapeake Energy Corp is a natural gas and oil exploration and production company. It explores, develops and acquires properties for the production of natural gas and crude oil from underground reservoirs and also provides marketing & midstream services.
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