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Why Chesapeake Energy Corporation Stock Is Rocketing Today

Matthew DiLallo, The Motley Fool

What happened

Shares of Chesapeake Energy Corporation (NYSE: CHK) are soaring today, up nearly 15% as of 10:00 a.m. EST, after the company reported a strong fourth quarter and a brighter outlook for this year.

So what

Chesapeake Energy reported adjusted net income of $314 million, or $0.30 per share, in the fourth quarter. That was well above the year-ago period, when it posted $64 million, or $0.07 per share, of adjusted net income. Furthermore, the company beat analysts' expectations by $0.06 per share. Fueling Chesapeake's stronger-than-expected results was a combination of an 11% increase in oil output, an 18% decline in operating expenses, and an improvement in oil and gas prices.

A land rig drilling at sunset.

Image source: Getty Images.

In addition to that, Chesapeake provided a more upbeat outlook, anticipating that companywide production would rise 1% to 5% this year. That's an improvement from the forecast it provided in its production report earlier in the month, in which CEO Doug Lawler stated, "We currently forecast our 2018 production to build throughout the year, ultimately resulting in flat production growth on a year over year basis, but with lower capital spending." Instead, it now anticipates that output will increase, driven by expected improvements in its cost structure, which along with improved commodity pricing will provide the company with more cash flow to finance a higher production growth rate.

Now what

While Chesapeake Energy does expect to grow this year, it's not even in the same ballpark as stronger rivals. That's because the company still has nearly $10 billion of debt on its balance sheet, which hasn't improved over the past year. While Chesapeake does have some asset sales in the works, its debt will continue holding it back while peers hit the gas this year.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.