Chesapeake Energy Corp. (NYSE: CHK): Q1 Earnings Preview 2011

Chesapeake Energy Corporation (NYSE: CHK), the second-largest US natural gas producer, is scheduled to release its first-quarter earnings after the closing bell on Monday, May 2, 2011. Analysts, on average, expect the company to report earnings of 70 cents a share on revenue of $2.68 billion. In the year ago period, the company reported earnings of 82 cents per share on revenue of $2.80 billion.

Chesapeake Energy Corporation is a producer of natural gas in the United States. The company also owns the largest combined inventory of onshore leaseholds and 3-D seismic acreage in the U.S. 

Natural gas has been touted as the next big fuel, as it burns cleaner, more efficiently, and can be cheaper than oil. Natural gas is taking on a bigger energy role in the U.S., especially for electricity generation.

Early this year, the company outlined its 2011-12 strategic and financial plan, "the 25/25 Plan,". Chesapeake said that it plans to reduce long-term debt by 25% by substantially reducing leasehold spending and by reducing its two-year production growth rate to 25% from its previously planned growth rate of 30-40% through asset monetizations. 

In the preceding fourth-quarter, the Oklahoma City, Oklahoma-based company's net income was $180 million, or 28 cents per share, compared to a loss of $530 million, or 84 cents per share, in the prior year quarter. On an adjusted basis, the company earned 70 cents per share in the latest quarter. Revenue declined 11% to $1.98 billion from $2.22 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 63 cents a share on revenue of $2.38 billion.

Early in January, the company announced that daily production for the fourth quarter averaged around 2.9 billion cubic feet of natural gas equivalent, an increase of 11% over the 2.6 billion cubic feet of natural gas equivalent or bcfe last year. Excluding this sale of future production through a volumetric production payment covering a portion of its Barnett Shale assets, the company's fourth quarter production would have increased 25% year over year. Chesapeake's average daily production for the quarter consisted of around 2.6 billion cubic feet of natural gas and 59.5 thousand barrels of oil and natural gas liquids.

At its last earnings call in Februray, the company forecast full-year production growth of 9% and 17% for 2011 and 2012, respectively. Liquids production is expected to range between 32,000-36,000 thousand barrels (MBbls) and 51,000-57,000 MBbls for 2011 and the next year, respectively. Further, natural gas output is expected to be in bands of 900 to 930 Bcf for 2011 and 960 to1,000 Bcf for 2012.

The company has been aggressive in buying up properties in shale gas fields across the United States. But in response to persistent low natural gas prices, the company has vowed to shift its exploration focus away from drilling for gas in places and to instead look for oil.

The company recently sold 487,000 acres of leasehold and producing natural gas property in the Fayetteville Shale in Arkansas to BHP Billiton Ltd. of Australia for $4.75 billion. Chesapeake will use the money to pay down debt.

Chesapeake Chief Executive Officer Aubrey McClendon has told investors he plans to expand the company's oilfield services business as a way to control costs on that side of the exploration and production business. The company already has rig and trucking operations and is looking to expand its hydraulic fracturing business as it steps up drilling in oil and gas shale fields in the United States.  

Recently the company agreed to uy Bronco Drilling Company, Inc. for approximately $315 million, including debt, net working capital and outstanding warrants. The acquisition will enable Chesapeake to further its goal of owning approximately two-thirds of the rigs that it operates in its drilling program -- a key aspect of its vertical integration strategy -- at an attractive price per rig. Bronco currently owns 22 high-quality drilling rigs primarily operating in the Williston and Anadarko basins, including three that are under contract with Chesapeake. Chesapeake is currently Bronco's second largest customer. Chesapeake believes that the acquisition of Bronco should satisfy the vast majority of Chesapeake's anticipated rig investment needs through 2012.

Meanewhile, Chesapeake iscontinuing to deleverage after years of heavy borrowing with plans to repurchase several of its outstanding bonds using the proceeds from recent asset sales.The Oklahoma City-based natural gas giant had total debt outstanding of $12.5 billion at end of December. In February, Chesapeake Energy priced a $1 billion 10-year bullet senior notes issue at 6.125 percent, as part of a liability management program to extend and retire debt.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 10.21 and PEG ratio (5 yr expected) of 1.05. In terms of stock performance, Chesapeake shares have gained nearly 40 percent over the past year.

Full Disclosure: None.

Chesapeake Energy Corp. (NYSE: CHK): Q4 Earnings Preview

Chesapeake Energy Corporation (NYSE: CHK), the second-largest US natural gas producer, is scheduled to release its fourth-quarter earnings after the closing bell on Tuesday, February 22, 2011. Analysts, on average, expect the company to report earnings of 63 cents a share on revenue of $2.38 billion. In the year ago period, the company reported earnings of 77 cents per share on revenue of $2.22 billion.

Chesapeake Energy Corporation is a producer of natural gas in the United States. The company also owns the largest combined inventory of onshore leaseholds and 3-D seismic acreage in the U.S. Chesapeake, which spent about $5 billion to buy oil and gas property in 2010, has vowed to slow its spending. The company said it needed to spend money on new leases in 2010 in order to expand its oil production. Oil prices rose 15 percent in 2010, while natural gas fell 21 percent.

Natural gas has been touted as the next big fuel, as it burns cleaner, more efficiently, and can be cheaper than oil. Natural gas is taking on a bigger energy role in the U.S., especially for electricity generation.

In the preceding third-quarter, the Oklahoma City, Oklahoma-based company's net income was $515 million, or 75 cents per share, compared with a profit of $186 million, or 30 cents per share, in the year-ago period. On an adjusted basis, the company earned 70 cents per share in the latest quarter. Revenue surged to $2.58 billion from $1.81 billion. Analysts, on average, expected the company to report earnings of 64 cents per share on revenue of $2.31 billion.

Early in January, the company announced that daily production for the fourth quarter averaged around 2.9 billion cubic feet of natural gas equivalent, an increase of 11% over the 2.6 billion cubic feet of natural gas equivalent or bcfe last year. Excluding this sale of future production through a volumetric production payment covering a portion of its Barnett Shale assets, the company's fourth quarter production would have increased 25% year over year. Chesapeake's average daily production for the quarter consisted of around 2.6 billion cubic feet of natural gas and 59.5 thousand barrels of oil and natural gas liquids.

The company has been aggressive in buying up properties in shale gas fields across the United States. But in response to persistent low natural gas prices, the company has vowed to shift its exploration focus away from drilling for gas in places and to instead look for oil.

Last month, the company outlined its 2011-12 strategic and financial plan, "the 25/25 Plan,". Chesapeake said that it plans to reduce long-term debt by 25% by substantially reducing leasehold spending and by reducing its two-year production growth rate to 25% from its previously planned growth rate of 30-40% through asset monetizations. Chesapeake Energy had roughly $11.7 billion in long-term debt on its balance sheet at the end of the third quarter.

Recently, the company announced plans to divest its Fayetteville Shale properties along with its stakes in two private companies, Frac Tech Holdings, LLC and Chaparral Energy Inc in order to reduce its long-term debt level by 25% over the next two years. The sale is expected to be completed within the first half of 2011. With leasehold of approximately 487,000 net acres in the Fayetteville Shale, Chesapeake is the second-leading producer in the field, delivering about 415 million cubic feet equivalent of natural gas every day. Chesapeake holds about 25.8% interests in Cisco, Texas based oilfield-service company Frac Tech and 20.0% in oil-and-gas producer Chaparral Energy, of Oklahoma City. Chesapeake targets to utilize a part of the sale consideration to trim about $2.0 billion to $3.0 billion of its shorter-dated senior notes and cut down on borrowings under its revolving bank credit facility.

Late in January, the company agreed to sell several shale oil and gas leases in the U.S to Chinese oil giant Cnooc Ltd. for $570 million in cash. Cnooc, China's third-largest oil and gas producer by capacity, said it will take a 33.3% stake in leases covering 800,000 acres in the Denver-Julesburg and Powder River Basins in northeast Colorado and southeast Wyoming states. In addition to the transaction amount, Cnooc will fund two-thirds of Chesapeake's share of drilling and other costs up to maximum of US$697 million.

Full Disclosure: None.

Chesapeake Energy Corp. (NYSE: CHK): Q1 Earnings Preview

Chesapeake Energy Corp. (NYSE: CHK) is scheduled to release its first-quarter financial results after the closing bell on Tuesday, May 4, 2010. Analysts, on average, currently expect the company to report earnings of 70 cents a share on revenue of $2.37 billion. In the year ago quarter, the company reported earnings of 46 cents per share on revenue of $2 billion.

Chesapeake Energy Corporation is a producer of natural gas in the United States. It owns interests in approximately 44,100 producing natural gas and oil wells that are producing approximately 2.4 billion cubic feet equivalent (bcfe), per day, 93% of which is natural gas. The Company is focused on discovering, acquiring and developing conventional and unconventional natural gas reserves onshore in the United States. It also has operations in the Granite Wash Plays of western Oklahoma and the Texas Panhandle regions, and in the Mid-Continent, Appalachian Basin, Permian Basin, Delaware Basin, South Texas, Texas Gulf Coast and Ark-La-Tex regions of the United States.

In the preceding fourth quarter, the Oklahoma City, Oklahoma-based company reported narrower loss of $530 million or 84 cents per share, compared with a loss of $1.01 billion, or $1.74 per share, in the year-ago quarter. Total adjusted net income increased to $496 million or 77 cents per share from $444 million or 75 cents per share in the comparable quarter a year ago. Revenue declined to $2.22 billion from $2.98 billion in the year-ago quarter. Analysts, on average, expected the company to report adjusted earnings of 70 cents a share on revenue of $2.00 billion for the quarter.

The company's fourth quarter average daily production increased 13% over 2008 fourth quarter production. Chesapeake's daily production for the quarter averaged 2.618 billion cubic feet of natural gas equivalent or bcfe, an increase of 13%, over the 2.316 bcfe produced per day in the prior year fourth quarter.

In February, the company said that it estimates natural gas production to be in the range of 882 bcf - 902 bcf, oil production to be around 15,500 mbbls, and natural gas equivalent to be in the range of 975 bcfe - 995 bcfe for the year 2010. The daily natural gas equivalent midpoint is estimated at 2,700 mmcfe. The year-over-year production increase is indicated at 8%-10%.

For the year 2011, Chesapeake estimates natural gas production to be in the range of 1,025 bcf - 1,045 bcf, oil production to be around 17,500 mbbls, and natural gas equivalent in the range of 1,130 bcfe - 1,150 bcfe. The daily natural gas equivalent midpoint is estimated at 3,125 mmcfe. The year-over-year production increase is estimated to be around 15%-17%.

Chesapeake Energy Corp (CHK.N), one of the most active U.S. natural gas drillers, said on Monday its production rose 9 percent in the first quarter.

The company, based in Oklahoma City, said in an operational report that its first-quarter daily production averaged 2.586 billion cubic feet equivalent. Production was down 1 percent from the fourth quarter.

Natural gas has been touted as the next big fuel, as it burns cleaner, more efficiently, and can be cheaper than oil. Natural gas is taking on a bigger energy role in the U.S., especially for electricity generation. Last year, electric generation from natural gas increased 5.1 percent while generation from coal fell 10.8 percent, according to the Energy Information Administration. More than a fifth of the nation's electricity now comes from gas. According to EIA forecasts, U.S. natural gas consumption this year would average about 63.8 bcf per day, up 1.9percent from 2009 demand of 62.28 bcf daily. EIA expects total natural gas consumption to decline by 0.6 percent in 2011.

NYMEX Natural Gas futures is up 13 percent from a year ago.

In terms of stock performance, Chesapeake shares are down over 12% since the beginning of the year. Shares of the company closed at $24.08. on Monday.

Full Disclosure: None.

Chesapeake Energy Corp. (NYSE: CHK): Q4 Earnings Preview 2009

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.

Full Disclosure: None.