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Chesapeake (CHK) Q1 Earnings Miss Estimates on Lower Output

Zacks Equity Research

Chesapeake Energy Corporation CHK reported first-quarter 2019 earnings per share (excluding special items) of 14 cents, missing the Zacks Consensus Estimate by a penny. The bottom line also declined from the year-ago quarter’s 34 cents.

Operating revenues amounted to $929 million, down from $1,243 million in the year-ago quarter. The top line also missed the Zacks Consensus Estimate of $1,094 million.

The weak first-quarter 2019 results were affected by lower production volumes and a decline in natural gas prices.

Chesapeake Energy Corporation Price, Consensus and EPS Surprise

Chesapeake Energy Corporation Price, Consensus and EPS Surprise

Chesapeake Energy Corporation price-consensus-eps-surprise-chart | Chesapeake Energy Corporation Quote

Operational Performance

Chesapeake’s production in the reported quarter was approximately 44 million barrels of oil equivalent (MMBoe), down from 50 MMBoe a year ago. The total production comprised 10 million barrels (MMbbls) of oil (up 25% year over year), 182 billion cubic feet of natural gas (down 18%) and 4 MMbbls of natural gas liquids (NGLs) (down 20%).

Oil equivalent realized price — exclusive of unrealized gains (losses) on derivatives — was $27.62 per barrel of oil equivalent (Boe), marginally increasing from $27.31 in the year-ago quarter. Oil price rose to $58.86 per barrel from $56.89 in the year-ago period. Natural gas prices declined to $3.07 per thousand cubic feet from the year-ago level of $3.49. Average sales price of NGLs was recorded at $20.03 per barrel in the quarter compared with $25.36 in the year-ago period.

Operating Expenses

Total operating costs in the first quarter declined to $2,378 million from $2,482 million in the prior-year period. However, quarterly production expenses per Boe increased to $3.02 from $2.94 in the year-ago period.

Capital Expenditure

Total capital expenditure increased to $559 million in the first quarter from $543 million in the year-ago period, primarily due to rise in drilling and completion capital spending.

Financials

At the end of the quarter, Chesapeake had cash balance of $8 million. Net long-term debt was $9,167 million.

Guidance

The company issued its production guidance for 2019 in the range of 475,000-505,000 Boe per day. Moreover, the company reduced its total capital budget for 2019 from $2,300-$2,500 million to $2,105-$2,305 million. To optimize its portfolio, the company has shifted part of its planned capital budget from the Marcellus Shale and Mid-Continent assets to the Powder River Basin area, where output is expected to surge in the second half of the year.

The company intends to change its production volume mix via producing more oil. At the end of this year, the company intends to reach oil mix of 26% from the current level of 22.7%.

Zacks Rank and Stocks to Consider

Currently, Chesapeake carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Cactus, Inc. WHD, Hess Corp. HES and Apache Corporation APA, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

Cactus’ earnings growth is projected at 11.8% through 2019.

Hess’ earnings are expected to grow 90.5% through 2019.

Apache beat the Zacks Consensus Estimate in each of the last four quarters, with average positive earnings surprise of 31%.

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