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Chesapeake (CHK) Q2 Earnings Lag Estimates on Low Gas Volumes

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Chesapeake Energy Corporation (CHK - Free Report) reported second-quarter 2019 loss per share (excluding special items) of 10 cents, wider than the Zacks Consensus Estimate of loss of 7 cents. In the year-ago quarter, the company reported a profit of 15 cents a share.

Operating revenues amounted to $1,454 million, up from $982 million in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $1,163 million.

The bottom line has been affected by lower natural gas production and a decline in commodity price, partially offset by record quarterly oil volumes.

Operational Performance

Chesapeake’s production in the reported quarter was approximately 45 million barrels of oil equivalent (MMBoe), down from 48 MMBoe a year ago. The total production comprised 11 million barrels (MMbbls) of oil (up 38% year over year), 185 billion cubic feet of natural gas (down 12%) and 3 MMbbls of natural gas liquids (NGLs) (down 40%). Importantly, the daily oil production of 122 MBbl during the June quarter represents the highest volume of crude produced in any quarter by the upstream energy player.

Oil equivalent realized price — exclusive of unrealized gains (losses) on derivatives — was $26.25 per barrel of oil equivalent (Boe), increasing from $23.82 in the year-ago quarter. Oil price rose to $61.44 per barrel from $57.16 in the year-ago quarter. However, natural gas prices declined to $2.48 per thousand cubic feet from the year-ago level of $2.64. Moreover, average sales price of NGLs was recorded at $13.43 per barrel in the quarter compared with $24.97 a year ago.

Operating Expenses

Total operating costs in the second quarter declined to $2,108 million from $2,449 million in the prior-year period. However, quarterly production expenses per Boe increased to $3.68 from $2.86 in the year-ago period.

Capital Expenditure

Total capital expenditure increased to $559 million in the second quarter from $530 million in the year-ago period, primarily due to a rise in initial drilling and completion capital spending.

Financials

At the end of the quarter under review, Chesapeake had a cash balance of $4 million. Net long-term debt was $9,701 million, leading to a debt-to-capitalization ratio of 69.6%.

Guidance

The company issued its updated production guidance for 2019 in the range of 484,000-505,000 Boe per day. Notably, the company maintained its total capital budget for 2019 at $2,105-$2,305 million.

Zacks Rank & Stocks to Consider

Chesapeake Energy currently carries a Zacks Rank #4 (Sell). Meanwhile, a few better-ranked players in the energy space include World Fuel Services Corporation (INT - Free Report) , Delek Logistics Partners, L.P. (DKL - Free Report) and TC PipeLines, LP (TCP - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

World Fuel beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 16.4%.

Delek Logistics is likely to see earnings growth of 4.9% through 2019.

TC PipeLines has an average positive earnings surprise of 12.6% for the past four quarters.

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