Chesapeake Energy Corp. (NYSE: CHK) reported first-quarter 2018 results before markets opened Wednesday. The oil and gas exploration and production company posted adjusted earnings per share (EPS) of $0.34 on revenues of $2.49 billion. In the same period a year ago, the company reported adjusted EPS of $0.23 on revenues of $2.75 billion. First-quarter results also compare to consensus estimates for a EPS of $0.27 and $2.53 billion in revenues.

The company’s total revenues from oil, natural gas and natural gas liquids sales were down 15% due to an unrealized loss on hedges of $119 million. Average daily production rose from 528,000 barrels of oil equivalent per day in the first quarter of 2017 to 554,000 barrels this year.

The average (unhedged) price per barrel of oil rose from $50.24 last year to $64.61, and the price per thousand feet of natural gas rose from $3.10 to $3.18. On an oil-equivalent barrel basis, the average price rose from $24.13 to $27.27.

The company’s outlook for fiscal year 2018 remained mostly unchanged, including production growth of 1% to 5% (adjusted for asset sales), oil production of 51 million to 55 million barrels, natural gas production of 825 million to 875 million barrels of oil equivalent, and natural gas liquids production of 20 million to 22 million barrels. The not-so-good news is that Chesapeake now estimates that it will lose $10.20 per barrel of oil on realized hedging effects.

2018 production expenses are estimated at $2.60 to $2.80 per barrel of oil equivalent compared with $2.81 in 2017 ($2.50 in the fourth quarter). Capital expenditure is forecast in a range of $1.98 billion to $2.38 billion (compared to approximately $2.46 billion in 2017).

Chesapeake also raised its estimate of adjusted EBITDA from a prior range of $2.2 billion to $2.4 billion to a new range of $2.25 billion to $2.45 billion.

Analysts are calling for second-quarter EPS of $0.14 per share on revenues of $2.29 billion and EPS of $0.74 per share on revenues of $9.47 billion for the full year.

CEO Doug Lawler said:

The strength of our operations and improved cost structure, coupled with higher realized prices, resulted in our best quarterly financial performance in over three years. For the second consecutive quarter, we recorded significant growth in our earnings and cash flow. Notably, our margin improvement, while aided by increases in commodity indices, was primarily driven by strong oil production and a lower cost structure, highlighting the differential profit generated beyond price impacts, and the sustainability of our improving financial performance. The net cash flow provided by operating and investing activities, including net proceeds from asset sales, was $609 million for the quarter and was the highest in more than three years, allowing us to reduce our long-term debt by $581 million.

Chesapeake’s long-term debt balance at the end of the quarter was $9.33 billion.

Higher prices and more production during the quarter were partially offset by non-performing hedges. That would be a bigger problem if Chesapeake produced more than 8 million barrels in the quarter. Natural gas hedges are estimated to add $0.13 per thousand cubic feet to realized prices for the year, a far larger piece of Chesapeake’s production.

Chesapeake’s shares traded up about 3.4% in Wednesday’s premarket to $3.08, after closing Tuesday at $2.98. The stock’s 52-week trading range is $2.53 to $5.87, and the consensus target price was $3.74 before this report. The highest price target prior was $6.00 a share.

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