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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.
Tue, Apr. 8, 6:21 PM
- Drilling fees on nearly 6,500 natural gas wells in the Marceluus Shale will bring more than $630M to Pennsylvania's coffers by the end of the year, three years after the state passed the fees into law, but critics say the oil and gas companies aren’t paying enough.
- Range Resources (RRC) paid the most with $27M in fees last year, followed by Chesapeake Energy (CHK) with $26.6M; among others, Cabot Oil & Gas (COG) forked over $13.2M, Anadarko Petroleum (APC) paid $12.3M, and EOG Resources (EOG) coughed up $4.5M.
- Critics who want the companies to pay more point to a report from the state’s independent fiscal branch that found Pennsylvania’s drilling fees were lower than severance tax rates on gas production in Texas and other states, which do not have drilling fees.
Tue, Apr. 1, 2:51 PM
- Marcellus shale gas producers will benefit more than producers elsewhere in the U.S. because of several favorable circumstances - including large producing wells in the northeast U.S. conveniently located near major markets - even if prices were to decline to 2012 levels, according to a Moody’s report.
- Anadarko Petroleum (APC), Southwestern Energy (SWN) and Chesapeake Energy (CHK) - all of which entered the play early during a weak natural gas price environment - especially have benefited, Moody's says.
- An infrastructural overhaul is still needed as buyers move away from traditional production hubs such as the Haynesville and Barnett, the credit rating agency says; the transition already has caused a decline in credit quality for Exco Resources (XCO), Forest Oil (FST) and Quicksilver Resources (KWK).
Wed, Mar. 26, 3:19 PM
- Lower than expected production from Chesapeake Energy’s (CHK -1.1%) Sahara natural gas field in Oklahoma is threatening $880M in loans and notes from Barclays under a pair of agreements that repay the borrowings with future supplies of gas, crude oil and gas byproducts, Bloomberg reports.
- Output from 3,300 CHK-operated wells in the Sahara field was 12% below projections during six months ending in February, Moody’s says; as a result, the production coverage ratio on the Glenn Pool Oil & Gas Trust five-year loan and 10-year notes declined to 1.18 from 1.29.
- In December, Moody’s had downgraded ratings on $360M in CHK borrowings backed by Barnett Shale wells in Texas after production growth there slowed to 3.4% in 2013 after growing at double-digit rates in 11 of the prior 12 years.
Mon, Mar. 24, 6:45 PM
- Chesapeake Energy (CHK) stock has dropped ~6% over the last six months vs. the S&P 500's 10% rise, but Chairman Archie Dunham is still a buyer, adding another 54K shares last week totaling ~$1.4M.
- The former ConocoPhillips chairman has spent $17.4M buying CHK shares in the fewer than two years since he came out of retirement to head CHK's board.
- Dunham isn’t the only board member buying; CHK directors have spent $27.8M buying shares since June 2012, when the company stripped Aubrey McClendon of his chairmanship and installed Dunham and other new directors; those shares now are worth ~$33.3M.
- The latest buying suggests confidence in CHK's new leadership and strategy; under CEO Doug Lawler, who joined last June, the company cut capital spending in half in 2013 to $7.2B from $14.1B the previous year with plans to trim another 20% in 2014.
Wed, Mar. 19, 10:58 AM
- Chesapeake Energy (CHK -0.4%) and Encana (ECA -1.3%) appear before a Michigan judge today to answer allegations they criminally conspired to lower land leases in the state.
- Collaboration between the two companies may have caused lease prices to plummet from $1,510/acre at a May 2010 auction to less than $40/acre at an auction conducted five months later, according to the Michigan AG.
- ECA has expanded its presence in the region’s Collingwood shale formation, controlling ~429K acres by the end of 2012, while CHK withdrew from the area after investing $400M.
Mon, Mar. 17, 9:14 AM
- Chesapeake Energy (CHK) +2.6% premarket on news that it has filed with the SEC for a possible spinoff of its oilfield services division.
- CHK says it intends for the spinoff to be tax-free to its shareholders for U.S. federal income tax purposes.
- The business, which would be called Seventy Seven Energy after the spinoff, operates the fifth-largest U.S. land-based rig fleet, with 77 walking, pad-capable units; it drills, provides oilfield tools and operates fracking services in the Permian Basin, Eagle Ford, Marcellus and other U.S. shale plays.
Wed, Mar. 12, 10:19 AM
- WSJ examines Chesapeake Energy's (CHK -0.7%) deepening dispute with Pennsylvanians over royalty payments to those with CHK wells on their land.
- Pennsylvania requires oil and gas drillers pay royalties of at least 12.5%, but lets drillers deduct costs for transporting, processing and marketing - and CHK appears to take a much more aggressive approach to those deductions than other energy companies operating there, including Anadarko (APC) and Statoil (STO).
- "I'm paying them to take my gas," says one landowner who claims his royalties don't cover the added taxes for owning commercial property.
- The public outcry has grown so loud that Pennsylvania Gov. Corbett, who has received campaign contributions from the company, wrote an open letter last month asking the state attorney general to investigate.
Tue, Mar. 11, 7:32 AM| 2 Comments
Thu, Mar. 6, 3:00 AM
- Michigan has indicted Chesapeake Energy (CHK) and Encana (ECA) with conspiring to keep down oil and gas lease prices in the state.
- If found guilty, the companies could face penalties of up to $1M, while individuals could receive prison sentences as well as fines.
- The charges follow an investigation that was sparked by a Reuters article about how then Chesapeake CEO Aubrey McClendon and other senior executives at the company and at Encana discussed not "bidding each other up."
- The talks came after Michigan prices soared to as high as $3,000 per acre in mid-2010; they then fell sharply later that year.
- Encana and Chesapeake still face a separate, federal investigation.
Fri, Feb. 28, 9:11 AM
- Chesapeake Energy (CHK) announces two agreements to sell midstream compression assets for a combined $520M, as it continues to streamline its portfolio towards improving its balance sheet with "minimal impact" on 2014 cash flow guidance.
- Access Midstream Partners (ACMP) will purchase 103 compression units with a combined capacity of ~200K hp from CHK subsidiary MidCon Compression for $160M, and Exterran Partners (EXLP) will purchase 334 compression units with a combined capacity of ~440K hp for $360M.
- CHK +0.4% premarket.
Wed, Feb. 26, 5:54 PM
- Nearly a year after Chesapeake Energy (CHK) ousted Aubrey McClendon after a governance scandal and a liquidity crisis, the former CEO retains financial ties to CHK and is using them to try to change company plans, according to a Reuters report.
- McClendon is attempting to force CHK to drill 12 multimillion dollar wells in Louisiana's Haynesville Shale even as CHK tries to rein in spending and cut debt to focus on other shales, according to a CHK lawyer.
- As a legacy of founding CHK, McClendon has personal stakes of 2.5% in nearly all of the tens of thousands of wells the company developed; he is also entitled to a slice of new wells, and he has asked Louisiana regulators to order CHK to follow his drilling plan.
Wed, Feb. 26, 12:59 PM
- While Chesapeake (CHK -7.1%) languishes after reporting its Q4 earnings, natural gas producer EOG Resources (EOG +1.8%) continues to rise after its Q4 results beat expectations.
- Howard Weil raises its EOG price target to $210 from $191 following strong earnings coupled with encouraging conference call commentary on EOG's domestic onshore portfolio; EOG has exhibited tremendous success in discovering new horizontal oil resource plays and capturing sizable acreage positions, and has improved well performance and reduced costs in other key areas outside of the Eagle Ford (Briefing.com).
- RBC Capital lifts its target to $206 from $182 as EOG increased its Eagle Ford net potential recoverable reserves by 45%; the firm thinks FY 2014 production growth guidance probably was conservative (Briefing.com).
Wed, Feb. 26, 8:51 AM
- Encana (ECA) and Chesapeake Energy (CHK) reportedly are negotiating civil settlements with Michigan to try to end a criminal investigation into whether the companies colluded to keep oil and gas lease prices artificially low in the state.
- Encana hopes a settlement will be finalized within a few weeks, a lawyer representing ECA said in a recent court hearing, although potential terms of any settlements are unknown.
- Michigan's AG has an incentive to resolve the matter before a four-year criminal statute of limitations deadline expires later this year.
Wed, Feb. 26, 8:15 AM
- Chesapeake Energy (CHK) -3.1% premarket after swinging to an unadjusted Q4 loss, hurt by charges related to its efforts to reduce debt and simplify its balance sheet, and adjusted earnings and revenues fall short of expectations.
- Average daily oil production rose 15% Y/Y but fell 7% Q/Q, average daily natural gas liquids production gained 26% Y/Y and 9% Q/Q, and natural gas production slipped 3% Y/Y and 1% Q/Q; planned reductions were responsible for most of the decrease, but cold weather also had an impact.
- So far in 2014, CHK has received $209M net proceeds from asset sales and expects to receive $150M-plus related to asset sales in 2012-13; the anticipated sale of its oilfield services business is seen generating another $650M.
- Proved reserves were 2.7B boe at year-end 2013, a 2% increase from year-end 2012.
Wed, Feb. 26, 7:06 AM| 5 Comments
Wed, Feb. 26, 12:05 AM
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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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