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Chesapeake Presents '14 Outlook, Shares Rise

Zacks Equity Research

Chesapeake Energy Corporation’s (CHK) share price moved up 1.7% to $24.82 per share as investors reacted positively to its outlook and capital program for 2014.

The company expects total capital expenditures in the range of $5.2–$5.6 billion, down 20% from the midpoint of its 2013 budget.

Production growth is projected at 8–10% year over year, adjusted for 2013 asset sales. Of the total production growth, 8–12% is expected from oil, 44–49% will come from natural gas liquids and 4–6% from natural gas.

On an absolute basis, Chesapeake has projected 2014 production growth of 2–4%, which is equivalent to an average daily production rate of 680–695 thousand barrels of oil equivalent (MBoe).

During 2014, Chesapeake plans to drill around 1,100 gross operated wells, unchanged from the 2013 activity level. The company intends to connect around 1,300 gross operated wells to sales in 2014, 115 less than 2013.

Chesapeake expects lower per-unit production and general and administrative (G&A) expense in 2014 due to the ongoing cost control initiatives. Production expense is expected between $4.25 and $4.75 per barrel of oil equivalent (Boe), down about 10% annually from the midpoint of Chesapeake’s 2013 production expense outlook range. G&A expense is anticipated at $1.35–$1.60 per Boe, down about 25% annually from the midpoint of Chesapeake’s 2013 production expense outlook range.

Owing to its size and quality of asset base, the company is confident of delivering a long-term production growth per debt-adjusted share of 5–9% annually as well as maintains a controlled capital spending profile.

Chesapeake carries a Zacks Rank #3 (Hold). However, there are better-ranked stocks in the oil and gas industry like Helmerich & Payne, Inc. (HP), NGL Energy Partners LP (NGL) and Cabot Oil & Gas Corp. (COG). All these stocks sport a Zacks Rank #1 (Strong Buy).

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