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Chesapeake Energy’s 2016 Guidance and Production Trends

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2016 production guidance

For 2016, Chesapeake Energy (CHK) expects its annual production to decline in the range of -5%–0%, adjusted for asset sales.

In comparison, upstream companies Cabot Oil & Gas (COG) and QEP Resources (QEP) expect their respective production levels to grow by 4.5% and -4%, respectively, in 2016. Newfield Exploration (NFX) expects its annual production in 2016 to be ~3% lower than its 2015 production levels.

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Production volumes

Chesapeake Energy’s (CHK) total production volume in 1Q16 was 672.4 Mboepd (thousand barrels of oil equivalent per day). This represents a YoY (year-over-year) rise of ~1%, adjusted for asset sales.

CHK’s capex guidance and cost guidance

CHK has announced a 57% YoY reduction in its capital expenditure to reduce its debt load and improve liquidity. The company continues to employ cost-efficient measures as it did in 2015. In 2016, Chesapeake Energy expects its LOE and G&A expenses per barrel to decline by 10% and 15%, respectively.

Quarterly cash costs per boe in 1Q16 were down by 28% YoY and down by ~11% sequentially.

CHK’s hedge position

To protect its cash flows against lower commodity prices, Chesapeake Energy has hedged 58% of its projected 2016 natural gas production volumes at ~$2.84 per thousand cubic feet and 56% of its projected 2016 oil production volumes at ~$47.79 per barrel.

Other companies that have hedged portions of their 2016 production include Newfield Exploration (NFX) and Cabot Oil & Gas (COG).

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