Chesapeake Flares After Aubrey McClendon Era

For the quarter, the oil and gas exploration and production company posted adjusted diluted earnings per share (EPS) of $0.59 on revenues of $5.05 billion. In the same period a year ago, the company reported adjusted EPS of $0.30 on revenues of $3.42 billion. First-quarter results also compared to the Thomson Reuters consensus estimates for EPS of $0.48 and $4.45 billion in revenues.

The statement on guidance came from the company’s CEO, who said:

We are raising our 2014 total production growth outlook on an adjusted basis to 9 – 12% to reflect higher-than-expected natural gas liquids volumes. Additionally, we are raising the midpoint of our 2014 operating cash flow outlook by $700 million, or 13%, due primarily to our increased production outlook, better-than-expected first quarter cash flow and an increase in our benchmark commodity price assumptions for the full year.

Oil production increased in the first quarter by about 6.5% year-over-year and decreased by about 3% sequentially, natural gas liquids (NGL) production increased 55% year-over-year and 29% sequentially, and natural gas production decreased 4.8% year-over-year and 4% sequentially. The unusually cold weather sliced about 7,600 barrels a day from the quarter’s total liquids production.

The big improvement came as a result primarily of higher natural gas prices, higher production of NGLs and lower costs and expenses. Oil prices were $4.50 a barrel lower sequentially and $9.77 lower year-over-year. Natural gas prices rose to $3.27 per thousand cubic feet on average in the quarter, up from just $1.90 a year ago and $2.13 in the prior quarter.

During the first quarter, Chesapeake received $520 million of net proceeds from asset sales. In April the company received $362 million on the closing of another previously announced sale, bringing the year-to-date total for asset sale proceeds to more than $925 million. Chesapeake sold off $4.4 billion in assets in 2013.

The combination of lower expenses, higher realized prices and improved production adds up to a solid start to the year.

Chesapeake shares traded up about 0.2% Thursday morning, at $29.70 in a 52-week range of $19.12 to $29.84. The consensus target price for the shares was around $28.20.

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