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Higher Oil Production to Boost Chesapeake (CHK) Q3 Earnings

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Chesapeake Energy Corporation (CHK - Free Report) is expected to trump estimates when it releases third-quarter 2019 results on Nov 5, before market open.

The oil & gas exploration and production company beat earnings estimates twice in the trailing four quarters.

Let’s see how things have shaped up prior to the announcement.

Which Way are Estimates Headed?

Let’s take a look at the estimate revision trend to get a clear picture of what analysts expect from the company prior to the earnings release.

The Zacks Consensus Estimate for third-quarter loss per share has been revised downward over the past 30 days to 9 cents. The figure suggests a year-over-year decline of 147.4%.

Further, the Zacks Consensus Estimate for revenues of $1.2 billion suggests a 2.5% drop from the prior-year quarter.

What Our Quantitative Model Suggests

Our proven model predicts an earnings beat for Chesapeake this time around. This is because it has the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Chesapeake has an Earnings ESP of +8.24%. The Zacks Consensus Estimate is pegged at a loss of 9 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Cimarex currently carries a Zacks Rank #3.

What is Driving the Better-Than-Expected Earnings?

The upstream company with $2.3-billion market cap has assets in prolific regions like Eagle Ford, Marcellus and Haynesville shale plays, which are expected to have boosted third-quarter 2019 earnings.

The company has been focusing on increasing the proportion of oil in its gas-weighted volume mix to reduce commodity price risk, and stabilize earnings and cash flow. This trait is expected to have continued in the third quarter and positively reflect on the upcoming results. Markedly, the Zacks Consensus Estimate for oil production is pegged at 11.36 million barrels (MMbbls), indicating an improvement from 8 MMbbls in the year-ago quarter.

With higher oil output, the Zacks Consensus Estimate for Chesapeake’s third-quarter 2019 oil sales is pegged at around $700 million, suggesting an increase from $594 million a year ago.

Q2 Performance

In the last reported quarter, Cimarex’s adjusted loss of 10 cents per share was wider than the Zacks Consensus Estimate of a loss of 7 cents due to lower natural gas production and a decline in commodity price.

Other Energy Stocks With Favorable Combination

Here are some other companies from the energy space that you may want to consider on the basis of our model, which shows that these too have the right combination of elements to deliver an earnings beat in the upcoming quarterly reports:

Marathon Oil Corporation (MRO - Free Report) has an Earnings ESP of +4.17% and a Zacks Rank of 3. The company is slated to announce third-quarter 2019 earnings on Nov 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rattler Midstream LP (RTLR - Free Report) has an Earnings ESP of +8.41% and a Zacks Rank of 3. The company is slated to announce third-quarter 2019 earnings on Nov 5.

Plains All American Pipeline, L.P. (PAA - Free Report) has an Earnings ESP of +0.43% and is a #3 Ranked player. The company is scheduled to release third-quarter 2019 earnings on Nov 5.

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