Chesapeake Misses on Earnings

Zacks Equity Research

Chesapeake Energy Corp. (CHK) reported adjusted fourth quarter 2013 earnings of 27 cents per share, falling behind the Zacks Consensus Estimate of 40 cents. However, the reported figure improved from the year-earlier profit of 26 cents a share.

Quarterly revenue improved to $4,541.0 million from $3,539.0 million a year ago. The top line also got the better of the Zacks Consensus Estimate of $1,758.0 million.

Full-year 2013 adjusted earnings of $1.50 a share came below our expectation of $1.66. The reported figure, however, improved from the year-ago profit level of 61 cents per share.

Total revenue in 2013 was $17,506.0 million, up from the 2012 figure of $12,316.0 million and ahead of the Zacks Consensus Estimate of $6,897.0 million.

Operational Performance

Chesapeake’s daily production for the reported quarter averaged approximately 665,100 barrel of oil equivalent (Boe), an increase of 2% from the 2012 fourth quarter and a 1% decrease from the 2013 third quarter. This decrease is primarily due to a planned reduction in well connections.

Severe weather also impacted the company's production in October and December. Average daily production consisted of approximately 111,300 barrels per day (Bbl/d) of oil, 63,700 Bbls of NGL and 2.9 billion cubic feet (Bcf) of natural gas.

Oil equivalent realized price in the reported quarter was $26.44 per boe, up from $25.41 in the year-earlier quarter. Average realizations for natural gas were $1.90 per Mcf compared with $2.07 per Mcf in the year-earlier quarter. Oil was sold at $89.58 per barrel, down from the year-ago price of $92.23 per barrel.

On the cost front, quarterly production expenses were $4.62 per Boe, an increase of 2% sequentially.


At the end of the quarter, Chesapeake − the largest U.S. natural gas producer after ExxonMobil Corp. (XOM) − had a cash balance of $837 million. The debt balance stood at $12,049 million, representing a debt-to-capitalization ratio of 40.0%.


As the company shifts its focus to more liquid-rich plays, it expects natural gas production to fall in 2014, while liquids production is expected to increase approximately 14–18% year over year. For 2014, Chesapeake expects capital expenditure in the range of $5,200–$5,600 million.  

Zacks Rank

Chesapeake currently carries a short-term Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Vermilion Energy Inc. (VET) and New Source Energy Partners L.P. (NSLP). All these stocks hold a Zacks Rank #1 (Strong Buy).

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