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- Investors are ignoring the impact to natural gas on lower drilling for oil.
- Chesapeake Energy still obtains over 70% of production volumes from natural gas making it one of the biggest beneficiaries of higher natural gas prices.
- Natural gas inventories remain below 5-year averages.
How Much Have Low Oil Prices Hurt Chesapeake Energy? Is It A Buy Here?
- CHK could suffer unanticipated cuts in its revenues of roughly $1B in FY2015 due the oil price crash.
- NGLs prices usually roughly follow oil prices; and NGLs are hard to hedge.
- Natural Gas prices should remain firm or higher throughout the winter; and they may remain firm throughout FY2015.
- CHK's huge portfolio of great development properties make it a long term buy even in the face of possible short term losses (or small gains).
- Chesapeake continues to expand its NGL production.
- This shift has improved the company’s profitability.
- Lower realized prices are keeping the company from reaching even higher profit margins.
- The current expectations for lower demand for NGL this winter could reduce its profitability in the coming quarters.
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.
Fri, May. 16, 9:59 AM
- Chesapeake Granite Wash Trust (CHKR -7.3%) is under pressure after Chesapeake Energy (CHK -3.8%) revealed plans to proceed with a spinoff of its oilfield services operations by the end of next month as it also plans other asset sales.
- Shares are also going ex-dividend today.
- CHKR revenues and distributions depend on the timing of initial sales from CHK's development wells in which the trust receives an interest, as well as the sales volume and prices attributable to the Trust's royalty interests.
Fri, May. 16, 7:29 AM
- Ahead of its investor day, Chesapeake (CHK) says it plans to spin off its Oilfield Services Business to shareholders in a tax-free transaction that will remove $1.1B in debt from the parent company's balance sheet.
- The division will be renamed Seventy Seven Energy and will grant Chesapeake a dividend of $400M to repay inter-company debt.
- Chesapeake also intends to divest its ownership of CHK Cleveland Tonkawa, which will improve its balance sheet, mostly by eliminating $1B of equity attributable to third parties.
- In addition, Chesapeake has agreed to sell various non-core assets for $600M.
- The transactions will lead to a net leverage reduction to Chesapeake of nearly $3B but only lower its 2014 output by 2% and its operating cash flow by $250M. The deals will also cut Chesapeake's 2014 interest expense and dividend payments by $70M and eliminate $200M of projected capex.
- Following these deals, Chesapeake expects 2015 production to grow 7-10% and capex of $5.5-6B. The company is targeting five-year annual production growth of 7-9%.
- Shares are -3.8%. (PR)
Fri, May. 9, 11:58 AM
- Wall Street’s idea of investing in climate change means investors are piling into natural gas - the least polluting fossil fuel - as energy have accounted for nearly two-thirds of the $8B of inflows into sector-based ETFs this year.
- A White House advisory panel said this week that global warming already is blighting the U.S. with more intense coastal flooding, rainstorms and wildfires, but “weather extremes are good for the energy business," says money manager Skip Aylesworth.
- Climate change is proving to be a boon for energy investment; on the day the report was issued, the S&P Energy Index hit a record, and $322M flowed into ETFs that specialize in energy.
- "Natural gas is a potential bridge to new technologies that are green or clean,” says State Street's David Mazza, which he says has sparked investor interest in companies such as Nabors Industries (NBR), EOG Resources (EOG), Anadarko Petroleum (APC) and Chesapeake Energy (CHK).
- ETFs: XLE, ERX, VDE, OIH, ERY, FCG, DIG, DUG, GASL, IYE, GASX, PXJ, PXI, PSCE, FENY, RYE, FXN, DDG
Thu, May. 8, 8:15 AM
- The SEC has ended an investigation of Chesapeake Energy (CHK) and former CEO Aubrey McClendon and does not intend to recommend enforcement action, according to the company's latest 10-Q filing.
- The two-year probe concerned a perk that allowed McClendon to invest in oil and gas wells CHK drilled; McClendon pledged his stakes in the wells as collateral to borrow more than $1B, much of it from financial firms that also invested in CHK.
- McClendon is now running American Energy Partners, a new private company that has hired CHK to drill wells in Ohio.
Wed, May. 7, 8:23 AM
- Chesapeake Energy (CHK) +2.6% premarket and may be poised to begin trading at a 52-week high after Q1 earnings and revenues skyrocket Y/Y and easily beat Wall Street expectations.
- Q1 oil and gas production totaled 675.2K boe/day, up 11% Y/Y after adjusting for asset sales, consisting of 109.5K barrels of oil, 84.2K bbl of natural gas liquids and 2.9B cf of natural gas.
- Average price it received for its gas during Q1 was $3.27/M cf, up from $2.13/M cf a year ago.
- Raises 2014 total production growth outlook 9%-12%, up from an earlier forecast of 8%-10% growth, to reflect higher than expected natural gas liquids volumes; raises the midpoint of 2014 operating cash flow outlook by 13% to $5.8B-$6B from prior $5.1B-$5.3B due primarily to the increased production outlook.
Wed, May. 7, 7:02 AM| Comment!
Tue, May. 6, 5:30 PM
- AGN, ALE, AOL, ARIA, ARQL, ATRO, AVA, AYR, BAM, BUD, CHK, CLH, COT, CTSH, DUK, DVN, DWSN, DX, EE, ENB, END, FWLT, GTIV, GWPH, HNT, HTZ, HUM, INXN, KELYA, KING, LAMR, LGND, LINC, LMIA, MDLZ, MEMP, MZOR, NAVB, NJR, NTLS, NVDQ, POM, PRGO, QRE, RIGL, ROC, SBGI, SE, SEP, SFUN, SNSS, SPAR, SPB, STRA, SUSP, SUSS, TAP, THI, TLM, TMHC, TPC, TRGT, USAC, VOYA, VSI, WBAI, WPX, WRES, XEC.
Tue, May. 6, 10:58 AM
- Chesapeake Energy (CHK +0.6%) CEO Doug Lawler may take the company he inherited from founder Aubrey McClendon to the one place his deals-obsessed predecessor never wanted to go: overseas.
- According to a Bloomberg profile, Lawler’s immediate goals are to curb spending and sell enough gas fields and side businesses so CHK’s expenses aren’t outstripping its cash flow for the first time in more than a decade, but his long-term ambition is to amass foreign fields and transform CHK from a U.S. shale driller into a global oil explorer in the mold of his former employer Anadarko.
- The question for now is whether Lawler can ever get there: Despite the drastic cost-cutting, CHK's net debt has stubbornly hovered ~$12B, triple the size of Chevron’s, a company more than 10x larger by market value.
Mon, May. 5, 3:58 PM
- Encana (ECA -1.5%) pleads no contest and agrees to pay Michigan a $5M settlement that could clear it of criminal antitrust charges stemming from its role in a 2010 land leasing spree, while Chesapeake Energy (CHK +0.2%) said at a hearing today it would continue to fight its own criminal antitrust charges (earlier).
- As part of ECA's settlement, the company agrees to cooperate with prosecutors in Michigan who are still pursuing a criminal case against CHK, which they allege was ECA's co-conspirator during the leasing spree.
Mon, May. 5, 11:59 AM
- Michigan prosecutors plan to call a former Encana (ECA) executive to testify on behalf of the state in a multi-day hearing in their criminal antitrust case against Chesapeake Energy (CHK) and Encana that begins today.
- Kurt Froistad, a former land acquisition specialist at ECA's U.S. unit until Aug. 2011, exchanged emails with a counterpart at CHK about dividing up bidding responsibilities between the two companies in nine Michigan counties ahead of an Oct. 2010 state land auction.
- Last week, the companies said they had received closure letters from the Department of Justice ending its federal investigation of possible antitrust violations related to their Michigan land-leasing activities.
Fri, May. 2, 4:55 PM
- Chesapeake Energy (CHK) must pay $121M to three Texas leaseholders after failing to persuade an appeals court to overturn a verdict that it reneged on deals to buy mineral rights when prices plunged in 2008.
- CHK had agreed in 2008 to buy ~500 oil and gas leases from Preston Exploration and two affiliates, but backed out after gas prices plunged more than 50% shortly before the deal was to close.
- The lawsuit is one of hundreds of landowner claims filed in federal and state courts in Texas, Michigan, Pennsylvania and other states alleging CHK broke contracts for oil and gas leases.
Wed, Apr. 30, 7:18 PM
- The Department of Justice ends its probe of possible antitrust violations by Chesapeake Energy (CHK) and Encana (ECA) related to their land-leasing activities in Michigan, the companies say.
- ECA says "The conclusion of their investigation is consistent with the findings of our independent investigation, and of our Board of Directors, that Encana did not engage in collusion with competitors in Michigan in 2010."
- CHK and ECA still face state charges in Michigan; both have denied the Michigan charges and said they would fight the allegations.
Thu, Apr. 17, 11:15 AM
- The outlook for Chesapeake Energy (CHK +1.7%) is on the upswing because CEO Doug Lawler has made substantial progress since taking the helm last June, top shareholder Southeastern Asset Management says in a letter today.
- Lawler’s “capital discipline and operational effectiveness will reward shareholders,” according to the owner of ~10% of CHK shares.
- Lawler has voiced plans to cut spending 20% this year, bringing it down to less than half of 2012 levels as CHK sells assets and spins off its oilfield services division.
Sat, Apr. 12, 8:25 AM
- Ohio geologists for the first time have linked earthquake activity in the Marcellus Shale to fracking, a new connection that could have implications for oil and gas drilling in the state and beyond.
- As a result, Ohio is setting new permitting conditions in quake-sensitive areas and has halted drilling indefinitely at the site of five quakes last month in the Youngstown area.
- Earthquakes recently rattled residents in Oklahoma, putting that state on track for record quake activity this year, which some seismologists say may be tied to oil and gas exploration.
- Among companies drilling in the Marcellus and Utica shales: RRC, CHK, COG, ACMP, APC, ATLS, CVX, CNX, DTE, EOG, EQT, XCO, XOM, MWE, NBL, RGP, REXX, RICE, RDS.A, RDS.B,SWN, STO, SXL, TLM, WMB, WPX.
Thu, Apr. 10, 2:24 PM
- Chesapeake Energy (CHK +1.3%) says it is planning a record $3B bond offering in three parts to refinance debt, as the cost to protect its bonds against default approaches a six-year low.
- CHK intends to issue floating-rate notes due 2019 and fixed-rated securities maturing in 2022 and 2026; proceeds will be used to repay a term loan that matures in 2017, fund a tender offer for debt due 2015 and redeem 2018 securities.
- CHK's debt has gained 6.47% in the last year, better than the 5.6% gain among peers in Bloomberg's USD High Yield Corporate Bond Index.
Thu, Apr. 10, 10:46 AM
- Oklahoma is experiencing a noticeable increase in earthquakes near drilling sites, according to the Oklahoma Geological Survey, suggesting a potential link between fracking and seismic activity.
- The state already has experienced as many earthquakes YTD than all of last year combined: 109 earthquakes with a magnitude 3 or higher through April 6, the same number of earthquakes as in all of 2013.
- The incidents pose a conundrum for regulators in a state that has fully embraced oil and gas drilling.
- Among drillers with a significant Oklahoma presence: CHK, CLR, APA, DVN, SD, EOG, MRO, OKE, OKS, GPOR, WPX, WMB, WPZ, LPI, CWEI, NFX, NGL, COG, WLL, NBL, MPO, PQ, XEC
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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