Saturday, November 5, 2011

Chesapeake Energy 3Q Results

Chesapeake Energy reported Thursday better than expected quarterly profit and, as a result, shares traded up nearly 7% in after-hours trading. The company reported revenues of $496 million and $0.72 on a per share basis. These results were up from 3rd quarter revenue last year of $478 million and an EPS of $0.70. Net income also increased substantially, up from $515 million to $879 million this year. (From $0.75 to $1.23 per share.)The $0.72 per share earnings beat analyst estimates of $0.66 per share and the street's estimate of $3.14 billion in revenues was toppled by a revenue of $3.98 billion, up from $2.58 billion last year. Chesapeake also reported an operating cash flow of $1.409 billion, with an EBITDA of $2.013 billion. The company told analysts that its daily natural gas production for the quarter averaged 3.329 bcfe(billions of cubic feet equivalent), which is an increase of about 9% from the same time last year. About 75% of this production was natural gas, while the remainder was oil and natural gas liquids. Average prices for natural gas were down this quarter, compared to the same time last year, and the company's natural gas and liquid hedging revenues were down as well.

Chesapeake has also announced a joint venture with an undisclosed energy company, which will generate an expected revenue to Chesapeake of approximately $3.4 billion. The joint venture partner will acquire an undivided 25% interest of a 650,000 acre area of the wet natural gas area of the Utica Shale play. The company has also just completed the sale of $500 million of perpetual preferred shares of its CHK Utica, LLC entity to EIG Global Energy Partners and expects to sell an additional $750 million to the energy corporation. These revenues help to cover the entire leasehold cost that Chesapeake pays for the Utica Shale Play and the company is well funded and prepared now going forward into the future. I feel that Chesapeake is strongly positioned within the industry and will continue to capitalize off of their enormous resource plays, keeping the company in an upward trend.


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