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An In-Depth Analysis of Chesapeake Energy: What Will 2017 Bring?

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An In-Depth Analysis of Chesapeake Energy: What Will 2017 Bring? PART 1 OF 10

What Does Chesapeake’s Debt Position Look Like?

Chesapeake’s net debt-to-EBITDA

Chesapeake Energy’s net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) has steadily risen since 4Q14.

What Does Chesapeake’s Debt Position Look Like?

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Chesapeake’s 3Q16 net debt-to-adjusted EBITDA multiple was ~19x. Looking at the above graph, we can see that Chesapeake’s net debt was on the rise from 4Q14 to 1Q16. CHK’s adjusted EBITDA, meanwhile, was mostly falling throughout this period, dropping more significantly in the latter half, explaining the pronounced rise in its net debt-to-adjusted EBITDA ratio from 4Q15 onward.

In 3Q16, CHK’s net debt was mostly flat on a sequential basis, but it was slightly lower year-over-year. Its 3Q16 trailing-12-month adjusted EBITDA fell more significantly than its net debt, pushing its net debt-to-EBITDA multiple higher.

Chesapeake’s 3Q16 net debt was ~$9.7 billion compared to $9.8 billion in 3Q15 and ~$9.6 billion in 2Q16. Its trailing-12-month adjusted EBITDA was ~$514 million in 3Q16, compared to its 3Q15 trailing-12-month EBITDA of ~$3.7 billion and its 2Q16 trailing-12-month EBITDA of ~$829 million.

Peer group comparison

Meanwhile, upstream peers Cabot Oil & Gas (COG), EQT Corporation (EQT), and Noble Energy (NBL) saw net debt-to-EBITDA ratios of ~2.4x, ~1.2x, and 5.2x, respectively. Together, these companies make up ~8% of the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).

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