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Chesapeake (CHK), Hi-Crush Ink Agreement for Sand Supply

Zacks Equity Research
Chesapeake's (CHK) agreement with Hi-Crush relates to in-basin purchase of Northern White frac sand to support completions program in the Marcellus and Powder River Basins.

Chesapeake Energy Corporation CHK has inked a long-term frac sand supply agreement with Hi-Crush Partners LP (HCLP).

The agreement relates to in-basin purchase of Northern White frac sand to support Chesapeake and its completions program in the Pennsylvania's Marcellus and Powder River Basins in Wyoming. Also, the company will use a PropStream container crew and associated logistics. Based on demand, it will consider an option to expand.

Chesapeake expects 2018 production to grow by about 3% from 2017 levels. Oil volumes are expected to increase significantly from 2017 levels, backed by increase in activity in Marcellus and Powder River Basin. The company plans to bring online 55 wells in the Marcellus in 2018, up from 43 in 2017. Powder River Basin is also expected to witness acceleration of activity in 2018 with plans to bring online 33 wells, compared with 25 in 2017.

The company maintained production guidance for 2018 in the range of 494,000-524,000 Boe per day. Moreover, the company reiterated projection for capital budget at $2,000-$2,300 million.

The company’s third-quarter earnings and revenues beat the Zacks Consensus Estimate and also improved from the prior-year quarter’s level.

The company has improved rapidly and is now the second largest natural gas producer in the United States. It is also the 13th largest producer of oil and natural gas liquids in the country. Chesapeake is noted growth through acquisitions. It has also demonstrated considerable drilling prowess, capitalizing on extensive inventory of acquired undeveloped acreage to make substantial reserve additions.

Zacks Rank & Key Picks

Currently, Chesapeake has a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Hess Corporation HES, Enterprise Products Partners L.P. EPD and Eni SpA E, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

New York-based Hess is a global integrated energy company. The company delivered an average positive earnings surprise of 230.5% in the last four quarters.

Headquartered in Houston, TX, Enterprise Products Partners is among the leading midstream energy players in North America. It pulled off an average positive earnings surprise of 9.3% in the last four quarters.

Based in Rome, Italy, Eni is among the leading integrated energy players in the world. The partnership reported a negative earnings surprise of 0.3% in the preceding four quarters.

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