Chesapeake Shares Diving on Results, McClendon (CHK, XOM, EOG)

Energy

Published: May 2, 2012 8:04 am

Last Updated: March 26, 2020 6:58 pm

Natural gas producer Chesapeake Energy Corp. (NYSE: CHK) reported first quarter results after the markets closed yesterday. The company missed the headline numbers, but that’s not the company’s biggest problem. That would be CEO and soon-to-be former chairman Aubrey McClendon, who still stands a chance that he could be booted out as CEO (our story here).

Chesapeake posted adjusted EPS of $0.18 compared with a consensus estimate of $0.29. Revenue was up 50% year-over-year to $2.42 billion, but analysts expected revenue of $2.75 billion. The company is the second-largest producer of natural gas in the US, trailing Exxon Mobil Corp. (NYSE: XOM) and ahead of EOG Resources Inc. (NYSE: EOG).

The bright spot in Chesapeake’s results was the boost in oil and liquids production over last year. Crude oil and liquids now account for 19% of Chesapeake’s production and 52% of the company’s realized revenue. A year ago, crude oil and liquids accounted for 13% of production and 23% of realized revenue.

The company’s realized price for natural gas in the quarter was $2.35/thousand cubic feet, down from $5.31 a year ago. The realized price for crude and liquids was $67.92/barrel, up from $63.20 a year ago. Boosting the company’s liquids production saved it from an even worse quarter, and Chesapeake will have to continue to boost liquids production.

Like Exxon, Chesapeake will curtail capital spending for the remainder of the year. The company said it would “further reduce drilling activity in dry natural gas plays and reduce spending on new leasehold.” Chesapeake expects to meet its goal of reducing debt to $9.5 billion by the end of this year by increasing liquids production and selling off assets.

Like every oil and gas company, Chesapeake lives and dies on upstream production and prices. With natural gas prices up about 20% in the last few weeks, there may be some recovery coming as production cuts take hold. But if liquids prices continue to decline, natural gas prices are unlikely to rise far enough and fast enough to make up the difference.

In pre-market activity this morning Chesapeake’s shares are down -8.4% at $17.95, in a 52-week range of $16.78-$35.75.

Paul Ausick

Credit Card Companies Are Doing Something Nuts

Credit card companies are at war. The biggest issuers are handing out free rewards and benefits to win the best customers.

It’s possible to find cards paying unlimited 1.5%, 2%, and even more today. That’s free money for qualified borrowers, and the type of thing that would be crazy to pass up. Those rewards can add up to thousands of dollars every year in free money, and include other benefits as well.

We’ve assembled some of the best credit cards for users today. Don’t miss these offers because they won’t be this good forever.

Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.