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Here's Why Shares of Chesapeake Energy (CHK) are Tumbling Today

Madeleine Johnson

On Thursday, shares of independent oil and gas company Chesapeake Energy Corp. CHK are tumbling, down about 8.5% in mid-morning trading after they reported first-quarter financial results that beat expectations.

CHK stock initially responded to its sold earnings report by surging roughly 5% in pre-market trading. Chesapeake posted adjusted earnings of 23 cents per share, beating the Zacks Consensus Estimate of 19 cents; net income was $75 million. Total revenues came in at $2.75 billion, while oil, natural gas, and natural gas equivalent revenues rose to $1.47 billion.

In Q1, Chesapeake’s production was roughly 48 million barrels of oil equivalent (MMBoe), representing a year-over-year decrease of 21.3%. Production consisted of approximately 8 million barrels (MMbbls) of oil (down 11.1% year-over-year), 211 billion cubic feet (bcf) of natural gas (down 23% year-over-year), and 5 MMbbls of NGL (down almost 17% year-over-year).

Average daily production of 528,000 barrels of oil equivalent was within guidance of 515,000 to 535,000. Average oil production is expected to reach 100,000 barrels per day by the end of 2017, up from 83,700 barrels in the first quarter. “We expect our production to grow significantly in the second half of 2017 as we place more wells to sales, and as a result, we have raised the bottom range of our 2017 production guidance,” said Doug Lawler, Chesapeake’s CEO, in a statement.

Chesapeake Energy Corporation Price, Consensus and EPS Surprise

Chesapeake Energy Corporation Price, Consensus and EPS Surprise | Chesapeake Energy Corporation Quote

Year-to-date, CHK has lost about 21% in value, and the company is highly leveraged to the volatile prices of oil and natural gas. As we saw today, oil fell to its lowest levels since November due to rising concerns over an increasing global supply; any gains seen since OPEC announced its first supply cuts were seemingly wiped out. It’s no surprise, then, that CHK stock is falling today despite its strong first-quarter earnings results.

As of 11:34 AM EST, U.S. West Texas Intermediate (WTI) Crude is down $1.69, or 3.53%, to $46.13 a barrel. Brent Crude oil futures have fallen similarly, down $1.70, or 3.35%, to $49.90 per barrel. U.S. gasoline futures (RBOB Gasoline) are slipping as well, down 3.14% to $148.47 per gallon in the same time frame.

Currently, Chesapeake is a #3 (Hold) on the Zacks Rank, with a VGM score of ‘B.’

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