In the first quarter, Chesapeake had an operating cash flow of $908 million and net borrowings of $670 million. The company also funded $1.49 billion capex. It issued $59 million in dividends and $72 million in preferred dividends and non-controlling interest distributions. At the end of the quarter, debt was $10.6 billion and cash was $2.9 billion for a net debt ratio of 34.9%.
Earnings per share (EPS) in the first quarter were $0.11, well above the consensus estimate of $0.03 EPS, but this was down 82% from the same period last year and 3% sequentially. A decline in unhedged prices of 58% year over year and 24% sequentially was partly offset by hedging gains and higher production volume. As a result Oppenheimer tweaked its 2016 estimated EPS to a net loss of $0.84 per share from a net loss of $0.76 per share.
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Oppenheimer further detailed in its report:
We are downgrading Chesapeake to Perform from Outperform and removing our $22/share price target, to reflect the negative impact on earnings and cash flow from lower oil and gas prices and lower production as a result of asset sales and sharply lower capital spending. Based on the future strip benchmark oil and gas prices, we expect Chesapeake to report losses of $544 million this year and $833 million next year, or $0.48/share and $0.84/share, respectively. We expect operating cash flow of $2.1 billion this year and $1.5 billion next year. Assuming CAPEX of $3.7 billion, annual dividends of ~$230 million and preferred dividend of ~$220 million, we expect free cash flow deficits of $2.1 billion and $2.7 billion, respectively.
The highest analyst target is still listed all the way up at $24, but with the current price level under $14, that has to be seriously at risk too.
Shares of Chesapeake were down 3.2% at $12.64 on Thursday afternoon. The stock has a consensus analyst price target of $15.67 and a 52-week trading range of $12.45 to $29.92.
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