On Mar 31, 2014, we issued an updated research report on Chesapeake Energy Corporation (NYSE: CHK). The company posted fourth-quarter 2013 earnings of 27 cents per share, falling behind the Zacks Consensus Estimate of 40 cents. However, the reported figure improved from the year-earlier profit of 26 cents a share. Quarterly revenues improved to $4,541.0 million from $3,539.0 million a year ago. The top line also got the better of the Zacks Consensus Estimate of $1,758.0 million.
Chesapeake – an independent oil and gas company – registered a significant fall in natural gas price realizations during the fourth quarter. Average realizations for natural gas were $1.90 per per thousand cubic feet (Mcf) compared with $2.07 per Mcf in the year-earlier quarter. Also oil was sold at $89.58 per barrel, down from the year-ago price of $92.23 per barrel.
Chesapeake plans to invest heavily in the development of its liquids-rich holdings in the Eagle Ford Shale, Granite Wash and Mississippi Lime. The company's daily production for the reported quarter averaged approximately 665,100 barrel of oil equivalent, an increase of 2% from the 2012 fourth quarter and 1% decrease from the 2013 third quarter. This decrease is primarily due to a planned reduction in well connections.
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Severe weather also impacted the company's production in October and December. Average daily production in the fourth quarter consisted of approximately 111,300 barrels per day (Bbl/d) of oil, 63,700 Bbls of NGL and 2.9 billion cubic feet of natural gas. As the company shifts its focus to more liquid-rich plays, it expects natural gas production to fall in 2014, while liquids production is expected to increase approximately 14–18% year over year. For 2014, Chesapeake expects capital expenditure in the range of $5,200–$5,600 million.
However, Chesapeake's results are vulnerable to fluctuations in the natural gas market, since natural gas accounted for about three-fourth of its 2013 production.
Key Picks from the Sector
Chesapeake Energy currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. Meanwhile, one can consider better-ranked players in the energy sector like Valero Energy Corporation (NYSE: VLO), Range Resources Corporation (NYSE: RRC) and Helmerich & Payne, Inc. (NYSE: HP). All these stocks sport a Zacks Rank #1 (Strong Buy).
CHESAPEAKE ENGY (NYSE: CHK): Free Stock Analysis Report
HELMERICH&PAYNE (NYSE: HP): Free Stock Analysis Report
RANGE RESOURCES (NYSE: RRC): Free Stock Analysis Report
VALERO ENERGY (NYSE: VLO): Free Stock Analysis Report
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