While it’s still too early to declare that Chesapeake Energy Corp. (NYSE: CHK) has completed a 180-degree turn, there are definite signs of progress. The latest is the company’s first-quarter earnings announcement.
Chesapeake posted an adjusted net loss per share of $0.10, in line with the consensus estimate, and net revenues of $1.95 billion, well below the consensus estimate of $2.55 billion. But neither of these data points is responsible for the 11% jump in Chesapeake’s share price at the opening bell Thursday morning.
The proximate cause for the jump was the company’s announced sale of 42,000 net acres in the so-called STACK play in Oklahoma. The acronym stands for Sooner Trend Anadarko Basin Canadian and Kingfisher Counties, and the region is one of the top shale plays in the country, and Newfield Exploration Co. (NYSE: NFX), the announced buyer of Chesapeake’s acreage, is one of the STACK’s top operators.
Newfield paid $470 million for the acreage, which includes 400 wells producing about 3,800 barrels of oil equivalent (boe) per day, of which 55% is liquids. As a percentage of Chesapeake’s daily production that amounts to less than 1%. Barron’s cites Citigroup’s analyst who said, “[T]he deal should be very accretive to our valuation metrics. Newfield placed a value of $50mm on the proven and producing reserves and $10k/acre for the undeveloped acreage.”
A year ago, Newfield was paying $4,500 an acre for lease rights in the STACK. Last December, Devon Energy Corp. (NYSE: DVN) paid Felix Energy approximately $20,000 per surface acre for 80,000 net acres in the STACK that included wells producing nearly 9,000 boe per day. Four years ago, late Chesapeake CEO Aubrey McClendon was paying $400 an acre lease rights. Chesapeake made a nice bit of change on the sale, but Newfield didn’t fare too badly either.
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