Chesapeake Tests Investors' Patience Again With Bigger Loss, Lower Production

Energy

Published: November 5, 2019 9:45 am

Last Updated: January 30, 2020 1:36 pm

Chesapeake Energy Corp. (NYSE: CHK) reported third-quarter 2019 results before markets opened Tuesday. The oil and gas exploration and production company posted an adjusted net loss per share of $0.11 on revenues of $2.09 billion. In the same period a year ago, the company reported adjusted earnings per share (EPS) of $0.01 on revenues of $2.42 billion. Second-quarter results also compare to consensus estimates for a net loss of $0.10 and $2.12 billion in revenues.

Average daily production in the second quarter totaled approximately 478,000 barrels of oil equivalent a day, down about 11% year over year and down 3.6% sequentially. Oil accounted for about 24% of daily third-quarter production, compared to 17% in the same period a year ago.

Oil production averaged approximately 115,000 barrels a day in the third quarter, up from 89,000 barrels in the year-ago quarter. Natural gas production fell from about 2.332 billion cubic feet per day to 1.989 billion cubic feet, and natural gas liquids tumbled from 59,000 barrels a day to 32,000 barrels.

Chesapeake maintained its oil production guidance for the 2019 fiscal year in a range of 43 to 44.5 million barrels and total production, including natural gas and natural gas liquids at 177 million to 184 million barrels of oil equivalent. Daily production guidance was also left unchanged at 484,000 to 505,000 barrels a day.

Price realizations on oil were less than $2.00 a barrel higher than a year ago, while natural gas realizations were lower by $0.31 per thousand cubic feet. Chesapeake knocked $1.24 off its gathering, processing and transportation costs in the second quarter, lowering it to $6.12 per barrel of oil equivalent.

CEO Doug Lawler commented:

We expect our oil production to grow approximately 10% in the fourth quarter, compared to the third quarter, and we remain on track to meet our 2019 total production and capital expenditure guidance. Our capital efficiency improvements, expected reduction in cash costs and anticipated capital plan position us to target free cash flow in 2020.

Analysts have estimated that the fourth-quarter net loss per share will come in at $0.06 on revenues of $2.17 billion. For the full year, analysts expect a loss per share of $0.22 and $8.97 billion in revenues.

Early in Tuesday’s session, the stock traded at $1.36, down more than 12%, after jumping more than 8% on Monday. The stock’s 52-week range is $1.26 to $3.87. The consensus 12-month price target on the shares is $1.68. Average volume is just over 57 million shares traded daily, and more than 109 million shares changed hands on Monday.