Chesapeake Energy Corporation reported net income of $590 million or $.92 per share on revenue of $2.798 billion and production of 223 billion cubic feet of natural gas equivalent.
The major drivers of their positive earnings were a 9% year over year increase in average daily production, a 19% year over year increase in production adjusted to asset sales, and a 35% year over year increase in oil and natural gas liquids production. The company’s earnings increase also reflects an increase in the price of natural gas and realized hedging gains.
Chesapeake anticipates full-year production growth of 8-10% for 2010 and 16-18% in 2011. The company is also working on expanding its oil and gas liquids production to 15-20% of total production through organic growth by 2012.
Overall, we maintain a hold rating on the company, expecting revenue growth to be driven by increasing commodity prices, their increased exposure to the US shale play, and their organic growth.