Chesapeake Energy Corp. (NYSE: CHK) is scheduled to release its fiscal fourth-quarter 2009 financial results after the market close on Wednesday, February 17, 2010. Analysts, on average, expect the company to report earnings of 69 cents a share on revenue of $2 billion. In the year ago period, the company posted earnings of 73 cents per share on revenue of $2.98 billion.Chesapeake Energy Corporation, an oil and natural gas exploration and production company, engages in the acquisition, exploration, and development of properties for the production of crude oil and natural gas from underground reservoirs. Chesapeake Energy is one of the largest independent natural gas companies in the U.S. with proven reserves, in the third quarter of 2009, of over 12 trillion cubic feet equivalent, of which 92% is natural gas.
In the preceding third quarter, the Oklahoma City, Oklahoma-based company reported that fourth-quarter net income declined to $186 million or $0.30 per share from $3.29 billion or $5.62 per share in the prior-year quarter. On an adjusted basis, the company earned $440 million or $0.70 per share, down from $495 million or $0.87 per share for the year-earlier quarter.
Revenue for the quarter dropped to $1.81 billion from $7.49 billion in the previous year quarter. Analysts, on average, expected the company to report earnings of $0.65 per share on revenue of $1.96 billion.
Natural gas production rose to 210.3 billion cubic feet or bcf from 204.3 bcf for the same quarter a year ago. Oil production declined moderately to 3.03 million barrels or mbbls from 3.15 mbbls last year. The company's average daily production consisted of 2.28 billion cubic feet of natural gas.
The company began the third quarter with estimated proved reserves of 12.52 trillion cubic feet of natural gas equivalent or tcfe and ended the quarter down by 531 befe or 4% to 11.99 tcfe.
In November, the company backed its earlier issued production guidance of full-year 2009 natural gas production in the range of 815 bcf to 825 bcf and oil or 12,500 mbbls. The company also expects natural gas equivalent of 885 to 895 bcfe.
For full-year 2010, the company expects natural gas production in the range of 882 bcf to 902 bcf and oil or 12,500 mbbls. The company also expects natural gas equivalent of 957 to 977 bcfe. By year-end 2010, it expects daily net production to exceed 2.8 Bcfe and by year-end 2011 it expects its daily net production to exceed 3.1 Bcfe, which would be an increase of 25% from its third quarter 2009 average daily production.
Last month, Chesapeake Energy Corp. and a subsidiary of France's Total SA have closed on a $2.25 billion joint venture that will give Total access to a natural gas field in north Texas. It also said it will boost production at its other fields to account for its sale of Barnett Shale acreage to Total SA in order to keep its 2010 output target at 2,650 million cubic feet equivalent (mmcfe) a day. The natural gas giant also increased its 2011 production outlook by 50 mmcfe per day to 3,050 mmcfe per day, "to reflect the anticipated ongoing outperformance of our drilling programs," according to a filing with regulators.
The company's production has increased for 54 quarters out of those 67 including 31 quarters of the last 33 quarters over the past eight years. The Oklahoma City-based company has expanded by concentrating its capital in just a few geographic regions, allowing the company to gain an in-depth knowledge of the surrounding geology that has kept drilling success rates above 97% since 1991, and at 99% in 2008 and 2009. Chesapeake also aggressively acquires new reserves that it thinks could yield in the future.
Industrial demand for gas plunged in 2009 as the worst recession since the 1930s promoted plant closings and job cuts in the U.S. However, the demand for the fuel may improve amid a rebound in global economy and industrial activity. Natural gas has been touted as the next big fuel, as it burns cleaner, more efficiently, and can be cheaper than oil. According to EIA forecasts, U.S. natural gas consumption this year would average about 62.51 bcf per day, up 0.4 percent from 2009 demand of 62.28 bcf daily, as growth in residential, commercial and industrial consumption offsets declining demand from the electric power sector. Led by an expected increase in industrial gas use in 2011, overall gas demand next year was forecast to increase by 0.4 percent, little changed from its previous estimate.
The company's stock currently trades at a forward P/E (fye 31-Dec-10) of 9.58 and PEG Ratio (5 yr expected) of 1.75. In terms of stock performance, Chesapeake shares have gained 29 percent over the past year.
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