Texas Land Sale Boosts Chesapeake Energy (CHK)

Wyatt Investment Research

Chesapeake Energy (CHK) shares have been on quite a tear since mid-May. An extra $125 million in the natural gas behemoth’s pocket extended that run today.

The Oklahoma City-based company has agreed to sell 57,275 acres of oil and gas acreage in Texas to up-and-coming oil and gas producer Energy & Exploration Partners. The sale will net Chesapeake Energy $125 million, and is expected to close sometime in the fourth quarter.

News of the sale has boosted Chesapeake Energy shares 2.6% today, pushing the stock above $20 for the first time in over a month. The stock is now up 47% since bottoming out at $13.55 a share in mid-May when natural gas prices were just coming off decade lows.

As natural gas has rallied, so too has Chesapeake Energy – the second-largest natural gas producer in the world.

But the recent natural gas rally is only part of Chesapeake’s comeback story. The company has been actively selling off excess acreage in an effort to reduce its capital spending. Until last quarter, those expenditures had been eating away at the company’s quarterly profits – leading to an early June shakeup of the company’s board of directors.

Though the board wasn’t in place this past quarter, Chesapeake managed to turn things around, reporting a net income of $972 million three months after suffering a $28 million loss. A $1.2 billion surplus in the company’s Q2 capital expenditures line had a lot to do with the turnaround.

 So far, trimming some of the financial fat has translated to a fast-rising stock.



More From Wyatt Investment Research
View Comments (0)