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Chesapeake (CHK) Q2 Earnings Beat on Higher Realizations

Upstream player Chesapeake Energy Corporation CHK reported strong second-quarter 2017 results on the back of higher oil equivalent price realizations and lower operating costs.

Earnings per share (excluding special items) of 18 cents beat the Zacks Consensus Estimate of 14 cents. The company had reported adjusted loss per share of 16 cents in the prior-year quarter.

Total revenue increased to $1,279 million from $440 million a year ago. The top line also beat the Zacks Consensus Estimate of $1,072 million.

Operational Performance

Chesapeake’s production in the reported quarter was approximately 48 million barrels of oil equivalent (MMBoe), reflecting a year-over-year decrease of 20%. Production consisted of approximately 8 million barrels (MMbbls) of oil (flat year over year), 209 billion cubic feet (bcf) of natural gas (down 22.3% year over year) and 5 MMbbls of NGL (down almost 29% year over year).

Oil equivalent realized price – including realized gains (losses) on derivatives – in the reported quarter was $22.42 per barrel of oil equivalent, compared with $16.43 a year ago.

Total capital expenditure increased to $620 million from $393 million in the second quarter of 2016.

On the cost front, quarterly production expenses decreased more than 4% year over year to $2.92 per Boe.

Expenses

Total second-quarter 2017 operating expense was $1,882 million, down almost 45% year over year.

Financials

At the end of the quarter, Chesapeake had cash balance of $13 million. Net long-term debt was $9,850 million.

Guidance

Chesapeake has maintained the prior projection and expects 2017 production in the range of 541,000–562,000 Boe per day. Moreover, the company retained the 2017 capital spending projection in the $2,100–$2,500 million band.

Price Performance

Chesapeake has lost 16.3% of its value during the quarter versus the 16.8% downfall of its industry.

Zacks Rank and Key Picks

Chesapeake currently has a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector are TransCanada Corporation TRP, Range Resources Corporation RRC and Pembina Pipeline Corporation PBA. TransCanada and Range Resources sport a Zacks Rank #1 (Strong Buy), while Pembina Pipeline carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

TransCanada posted average positive earnings surprise of 4.06% over the last four quarters.

Range Resources’ 2017 earnings are projected to grow almost 116%.

Pembina Pipeline’s 2017 earnings are estimated to grow more than 90%.

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