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Chesapeake Energy (CHK) Q4 Earnings Beat, Reserves Grow

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Chesapeake Energy Corporation (CHK - Free Report) reported better-than-expected fourth-quarter 2016 results on considerably low operating expenses and increased price realizations for oil and natural gas. This upside was partially negated by lower oil equivalent productions.

Earnings per share (excluding special items) of 7 cents beat the Zacks Consensus Estimate of 6 cents. The company had reported adjusted loss per share of 16 cents in the prior-year quarter.

Total revenue decreased to $2,021 million from $2,649 million a year ago. The top line, however, beat the Zacks Consensus Estimate of $1,059 million.

Operational Performance

Chesapeake’s production for the reported quarter decreased 13.1% year over year to approximately 53 million barrels of oil equivalent (MMBoe). Production consisted of approximately 8 million barrels (MMbbls) of oil (down 11.1% year over year), 236 billion cubic feet (bcf) of natural gas (down 12%) and 5 MMbbls of NGL (down 29%).

Oil equivalent realized price in the reported quarter was $21.24 per barrel compared with $16.20 per barrel a year ago. Average realizations for natural gas were $2.59 per Mcf as against $1.99 per Mcf in fourth-quarter 2015. Oil was sold at $47.95 per barrel compared with $38.33 per barrel in the prior-year quarter.

Total capital expenditure decreased to $463 million from $548 million in the fourth quarter of 2015. 

On the cost front, quarterly production expenses decreased more than 18% year over year to $2.98 per Boe.

Expenses

Total fourth-quarter 2016 operating expense was $2,318 million, down 58.4% year over year.

Financials

At the end of the quarter, Chesapeake had cash balance of $882 million. Net long-term debt was $9,938 million.

Fourth-Quarter Price Performance

During the October–December quarter of 2016, Chesapeake Energy shares outperformed the Zacks categorized Oil & Gas-U.S Exploration & Production industry. During the aforesaid period, the company’s shares gained almost 10% compared with the broader industry’s increase of 0.6%.

Reserves

As of Dec 31, 2016, Chesapeake Energy had total proved reserves of 1,708 million barrels of oil equivalent (MMBoe), significantly higher than 1,504 MMBoe at the end of Dec 31, 2015.   

Guidance

Chesapeake expects 2017 production to be in the range of 532,000–562,000 Boe per day. Moreover, the company expects 2017 capital spending in the $1,900–$2,500 million band.

Zacks Rank and Key Stock Picks

Chesapeake Energy currently has a Zacks Rank #3 (Hold). Some better-ranked energy stocks include Ultra Petroleum Corp. , Cheniere Energy Inc. (LNG - Free Report) and W&T Offshore Inc. (WTI - Free Report) . While Ultra Petroleum sports a Zacks Rank #1, Cheniere Energy and W&T Offshore carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ultra Petroleum is expected to report revenue growth of 57.7% in 2017.

In 2017, Cheniere Energy is likely to report year-over-year growth of almost 287.5% and 76.9% in revenues and earnings, respectively.

W&T Offshore reported a positive earnings surprise in each of the last four quarters with an average beat of 31.49%.

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