Commodities & Metals

Chesapeake Energy Earnings Follow Natural Gas Prices Higher

Source: courtesy Chesapeake Energy Corp.
Chesapeake Energy Corp. (NYSE: CHK) reported second-quarter 2013 earnings before markets opened this morning. The oil and gas exploration and production company posted adjusted diluted earnings per share (EPS) of $0.51 on revenues of $4.68 billion. In the same period a year ago, the company reported adjusted EPS of $0.06 on revenues of $3.39 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.41 and $3.21 billion in revenues.

On a GAAP basis, second-quarter EPS totaled $0.66 a share. Excluded from adjusted quarterly earnings were noncash, unrealized gains on derivatives of $325 million and a gain of $68 million on asset sales, among other items.

Doug Lawler, Chesapeake’s new CEO, said:

Chesapeake has an exceptionally broad and deep asset base, which offers tremendous opportunity for value creation. A comprehensive companywide review of our capital allocation and other processes is underway and I believe these initiatives will result in substantial further improvement in both near-term and long-term capital efficiency and returns.

The company’s average daily production consisted of approximately 3.1 billion cubic feet of natural gas and approximately 168,000 barrels of liquids, comprised of approximately 116,000 barrels of oil and approximately 52,000 barrels of natural gas liquids (NGLs).

In the first half of 2013, Chesapeake has shed about $2.4 billion in assets, primarily in the first quarter. So far in the second quarter, the company has completed $1 billion in sales and expects to close another $300 million deal by the end of the quarter. The company has estimated that it will sell $4 billion to $7 billion in assets in all of 2013.

Consensus estimates call for third-quarter EPS of $0.40 on revenues of $3.12 billion and full-year 2013 EPS of $1.52 on revenues of $13.01 billion. Both estimates have risen since the company reported first-quarter earnings. The estimates likely will rise again because Chesapeake is adding another million barrels of oil production to its annual forecast, raising the total to 38 million to 40 million barrels for the year.

Chesapeake’s realized price for crude oil fell from $94.85 a barrel in the first quarter to $93.81 in the second quarter. In the fourth quarter of 2012, the realized price for crude was $92.23 a barrel.

Chesapeake’s realized price for a thousand cubic feet of gas in the second quarter came to $2.62, well above the $2.13 per thousand cubic feet the company received in the first quarter.

Chesapeake’s shares are trading up about 3% in the premarket, at $24.00 in a 52-week range of $16.23 to $23.54. The consensus target price for the shares was around $23.20 before today’s report.

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