How Did Hurricane Harvey Affect CHK’s 3Q17 and 2017 Production?
Chesapeake’s 2Q17 production
Chesapeake Energy’s (CHK) production in 2Q17 was 527.6 Mboed (thousand barrels of oil equivalent per day), which was ~20% lower than Chesapeake Energy’s reported production of 657 Mboed in 2Q16. On a sequential basis, the company’s production was flat.
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CHK noted that its fall in production in 2Q17 versus 2Q16 was primarily a result of the sale of its Mid-Continent and Barnett Shale assets in 2016 and the sale of its Haynesville Shale assets in 2017. So far this year, Chesapeake Energy has sold or agreed to sell its assets worth ~$360 million to various private buyers. As of June 30, 2017, Chesapeake Energy closed $95 million in asset sales, while ~$265 million remains in pending. The asset sales were expected to have closed by the end of 3Q17.
Oil as a percent of CHK’s total production
While CHK remains largely a natural-gas-weighted company, one of its key focuses this year has been increasing its oil volumes. As we can see above, CHK’s oil production as a percent of total production has consistently been increasing since 3Q16.
CHK projects its exit-to-exit oil production to rise ~10% in 4Q17 over 4Q16 and by 20.0% in 4Q18 over 4Q17. CHK’s oil production volumes in 2Q17 were 88,400 barrels per day compared to 90,500 barrels per day in 2Q16. Note that the oil percentage mix was higher in 2Q17 versus 2Q16 despite lower production in 2Q17, which means that oil’s contribution to total production was higher in 2Q17 than in 2Q16.
CHK’s 3Q17 and 2017 production guidance
For 3Q17, CHK expects production of 542 Mboed. Oil volumes in 3Q17 are expected to average 86,000 barrels per day, while total 3Q17 estimated production is higher on a sequential basis. 3Q17 oil volumes are estimated to fall sequentially. This company toned down its expectations on the back of Hurricane Harvey (which affected the Eagle Ford region where CHK operates), asset sales, and changes in capital allocation.
While CHK expects the impact of these events to be limited to 3Q17, it said it will be revising its full-year guidance later on. Existing production guidance for fiscal 2017 is 551.5 Mboed at the midpoint.
To know more about Chesapeake Energy, you can read Market Realist’s Will Crude Oil Prices Impact Chesapeake Energy Stock?