An In-Depth Analysis of Chesapeake Energy: What Will 2017 Bring?
Chesapeake Energy’s (CHK) short interest ratio (short interest as a percentage of float) on January 11, 2017, was ~13.3%.
CHK’s stock has risen 66% year-over-year. Meanwhile, its peers Rice Energy and WPX Energy have risen ~115% and 181%, respectively, in the same period.
Chesapeake Energy’s (CHK) current implied volatility is ~55%, ~4% higher than its 15-day average of 52.5%.
Chesapeake Energy’s (CHK) 3Q16 EV-to-adjusted EBITDA (enterprise value to adjusted earnings before interest, tax, depreciation, and amortization) ratio was 34.7x.
Chesapeake Energy’s (CHK) forward EV-to-EBITDA multiple of ~8.8x is slightly overvalued compared to its peer average of 7.6x.
In 3Q16, Chesapeake Energy (CHK) reported cash flow from operations (or CFO) of ~$376 million, ~18% higher than its CFO in 3Q15.
CHK expects to achieve cash flow neutrality by 2018 resulting from production growth driven by its 2017 investments.
A presentation released by CHK in October 2016 noted that it had reduced $2.1 billion worth of its debt in 2015 and 2016 as of September 30, 2016.
Since 2013, Chesapeake Energy’s (CHK) total debt has fallen significantly. In 3Q16, the company’s total debt was ~$9.7 billion.
Chesapeake Energy’s net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) has steadily risen since 4Q14.
Most of the increase in food requirement will take place in developing countries because the standard of living is expected to improve in those countries.
After its Barnett Shale exit, Chesapeake Energy (CHK) expected its operating income to rise ~$200 million–$300 million per year from 2016 to 2019.
CHK has a production mix of 75% liquids in the Eagle Ford, 56% of which is oil.
Chesapeake Energy (CHK) owns 307,000 acres in the Powder River Basin and has 2.7 billion barrels of oil equivalent gross recoverable resource potential.
CHK projects its exit-to-exit total production to rise ~7% in 4Q17. This rise in oil production is expected to be ~10% higher than in 4Q16.
CHK has 11.3 billion barrels of oil equivalent in total net recoverable resources and 5,600 potential drilling locations, with a rate of return of 40%.
According to CHK’s December 2016 presentations, break-even prices in the Marcellus and Utica Shales are $2.00 per MMBtu and $2.15 per MMBtu, respectively.
At the end of 3Q16, CHK had a debt principal balance of $8.7 billion, which lower than its $9.7 billion at the end of 2015.
On August 10, 2016, CHK announced intentions to exit the Barnett Shale. This deal helped it eliminate ~$1.9 billion in commitments to Williams Partners.
Chesapeake Energy’s December presentation noted that it had hedged 71% of natural gas volumes and 68% of oil volumes for 2017. It’s also hedged for 2018.