SandRidge, Chesapeake Hit Oil Slicks

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Two major energy producers ran into some problems with investors on Wednesday after reporting third quarter earnings. SandRidge Energy Inc. (NYSE: SD) and Chesapeake Energy Corp. (NYSE: CHK) both posted results that were better than analysts’ consensus estimates, but the outlook for both companies weighed on their stock prices today.

SandRidge produced nearly 4 million barrels of oil during the third quarter and about 25.8 billion cubic feet of natural gas, for total barrel of oil equivalent production of 8.25 million barrels or 89,600 barrels of oil equivalent per day. Not including the impact of derivatives,the company’s average realized price per barrel came to $95.71 and the realized price per thousand cubic feet of natural gas was $3.15. SandRidge raised full-year production guidance from 33.3 million barrels of oil equivalent to 33.6 million barrels.

Chesapeake produced 11 million barrels of oil in the quarter and 273 billion cubic feet of natural gas. Excluding the impact of derivatives, Chesapeake’s average realized price for a barrel of oil was $101.08 and the average realized price on a thousand cubic feet of natural gas was $2.12. Chesapeake has lowered its oil production estimate for the full year from a range of 40 to 42 million barrels to a new range of 38 to 40 million barrels. The top end of the company’s natural gas production range was lowered from 1.1 trillion cubic feet to 1.09 trillion cubic feet.

Chesapeake’s lowered production estimate is pretty clearly the reason for its share price drop today. But the SandRidge story is more complicated.

At the end of the second quarter SandRidge estimated its full-year average oil differential at $9.50 a barrel, reflecting higher volume of natural gas liquids and a decrease in premiums for its Louisiana Light Sweet crude oil. The company now estimates the differential at $0.50 a barrel for 2013. That implies significantly lower prices in the fourth quarter.

Shares of Chesapeake are down more than 7% at $26.15 in a 52-week range of $16.23 to $29.06.

SandRidge shares are down more than 8% at $5.97 in a 52-week range of $4.52 to $7.47.

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