What to Expect From Chesapeake Energy’s Investor Day

Thursday morning, October 20, at 10 a.m. ET, independent oil and gas producer Chesapeake Energy Corp. (NYSE: CHK) will host its first investor day in two years. Ahead of that presentation, 24/7 Wall St. wanted to see what the most fresh consensus analyst expectations were for 2017 and beyond. It is important to keep in mind that these will vary drastically based upon gas and oil prices, but here goes.

The revenue peak of $23.125 billion in 2014 fell to $12.76 billion in 2015. Thomson Reuters sees revenues falling to $7.92 billion in 2016, then sees revenue recovering to $9.2 billion in 2017, $10.49 billion in 2018 and $15.667 billion in 2019. The farther out you go, the fewer analysts there are making predictions.

For net income, analysts see a loss of $179 million in 2016, but that is expected to recover to a positive net income of $552 million in 2017 and $906 million in 2018. The loss per share is expected to be $0.21 in 2016, recovering to a profit of $0.78 per share in 2017 and $1.03 per share in 2018.

Investors and analysts are most likely to want to hear about further asset sales and the production forecasts that lead to those revenue and profit totals.

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First of all, are asset sales still on track to top $2 billion? Asset sales represent both good news and bad for Chesapeake. The proceeds are being used to reduce the company’s massive debt to a more acceptable level for investors, but the danger is that the sales will thin out the company’s asset base too much. In other words, by the time the balance sheet looks good, what will be left?

In early September, CEO Doug Lawler, said:

[W]e have increased our total production guidance for the remainder of the year. As for an initial look into 2017, we believe our oil production will be relatively flat in 2017 as compared to 2016, while total production volumes are projected to be down approximately 5% compared to 2016 levels.

The big question, and the one that Chesapeake cannot answer, is where prices for crude oil and natural gas are going. Right now, prices are rising, but demand for natural gas depends on the coming winter weather, and while demand for crude oil is expected to rise next year, price gains are not expected to top $55 a barrel by many analysts.

Analysts at Susquehanna raised their price target on the stock from $4.50 to $6.50 Tuesday morning, while Citi boosted its 12-month price target to $8.00 on Monday, and maintained a Neutral rating.

The consensus estimate (mean) from Thomson Reuters is currently $6.41, and that target has been set based on the recent recovery in oil and gas prices. That consensus target price was $5.74 in mid-September, $5.29 in mid-August and all the way down at $4.58 in mid-July.

Chesapeake’s shares traded up about 2.9% in the mid-afternoon Tuesday, at $6.53 in a 52-week range of $1.50 to $8.33.

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