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Chesapeake Energy reported better than expected earnings before the market opened Tuesday initially seeing $CHK pop 6% but it quickly reversed to be down 11% near 20 year lows on worries about debt and collapsed natural gas prices

Chesapeake Drilling

Chesapeake Energy Corp Earnings Beat Before Open Tuesday

$0.05 Beat ($0.05) EPS and $2.39 Billion beat forecast in revenue

Earnings

Chesapeake Energy reported net income was $0.05 per share, beating the expected $0.05 loss, compared to a loss of $0.30 per share in the previous year quarter. The adjusted loss narrowed to $0.10 per share from $0.13 per share a year ago.

Revenue rose by 4% to $2.39 billion as higher revenue from oil, natural gas, and natural gas liquids offset declines in marketing revenue.

Chesapeake Energy Corp

Market Reaction >$1.39 ▼ 0.17 (-11.22%)

Highlights

  • Average daily production for the 2019 second quarter was approximately 496,000 boe and consisted of approximately 122,000 bbls of oil, 2.034 billion cubic feet (bcf) of natural gas and 35,000 bbls of natural gas liquids (NGL).
  • Average daily production for the 2018 second quarter was approximately 530,000 boe and consisted of approximately 90,000 bbls of oil, 2.311 bcf of natural gas and 55,000 bbls of NGL.
  • Oil production represented approximately 25% of the company's 2019 second quarter aggregate production compared to 17% in the 2018 second quarter.
  • Despite lower average prices for our oil, natural gas and NGL sold, Chesapeake's cash margins increased significantly in the 2019 second quarter compared to the 2018 second quarter, primarily due to a higher oil production mix and a decrease in GP&T and general and administrative expenses.

Chesapeake Energy Q2 2019 Earnings

  • Chesapeake reduced its cash operating expenses on an absolute basis by $57 million, or approximately $0.40 per boe.
  • Chesapeake produced about 122,000 barrels of oil per day, the highest quarterly oil production in the company’s history.
  • This was driven by the integration of Brazos Valley asset, steady growth from the PRB and improved base production performance from South Texas and the Mid-Continent.
  • Chesapeake invested total capital expenditures of about $559 million during the second quarter, compared to about $530 million a year earlier. The increase was largely attributable to an increase in net wells spud, completed and connected.
  • $1.6 billion of liquidity available under the Chesapeake parent credit facility Approximately 85% of 2019 forecasted oil, natural gas and NGL revenue hedged at prices significantly above the current strip

Chesapeake operations

Outlook

Chesapeake is evaluating options to be a shipper on a crude pipeline that will deliver Brazos Valley oil volumes into the Houston, Texas market beginning in the 2020 fourth quarter.

Chesapeake is also pursuing a new gathering agreement in the area that would lower the current reliance on trucking oil volumes and improve its cost structure in the region. The company expects to have this new gathering agreement in place for the operating area during the second half of 2019.

Looking ahead, the oil production is poised to increase in the second half of 2019 as about 170 oil wells are expected to be placed to sales, an increase of about 50% over the first half. The company is projected to grow oil production by double-digits in 2020 on about flat year-over-year capex, yielding about flat adjusted EBITDAX at current NYMEX strip pricing and current hedge position.

Chesapeake Energy Q2 2019 HEdges

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