A Look at Chesapeake Energy’s Free Cash Flow Trends



Chesapeake’s cash flow

In this part of the series, we’ll look at Chesapeake Energy’s (CHK) cash flow. In 2Q16, CHK reported cash flow from operations (or CFO) of ~$95 million. This total was ~70% lower than its CFO in 2Q15.

The fall was primarily due to lower realized energy prices, resulting in lower revenue. Read Analyzing Chesapeake Energy’s Profit Margin and Revenue Trends to know how CHK’s revenue fared in 2Q16.

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Chesapeake Energy’s free cash flow

Chesapeake’s free cash flow (or FCF), which is its operating cash flow minus its capital expenditure (capex), has remained negative over the past nine quarters, as the graph above shows. Chesapeake’s FCF was -$623 million in 2Q16.

Chesapeake Energy’s capex in 2016

Chesapeake Energy provided a 2016 capex guidance range of $1.3 billion–$1.8 billion. This represents a 57% YoY (year-over-year) reduction. CHK’s 2Q16 earnings release noted that its 2016 capex is expected to be at the higher end of the above-mentioned guidance range “due to additional drilling and completion activity as a result of efficiency gains and an acquisition of additional working interests in the Haynesville Shale.”

Read Where Is Chesapeake Energy Allocating Its Capex Budget in 2016? to know more about CHK’s 2016 capex plans.

Many upstream companies have slashed their 2016 capexes due to lower energy prices (USO) (UNG). Anadarko Petroleum (APC) and Hess (HES) have announced capex cuts of ~50% and 40%, respectively, compared to 2015. Rice Energy’s (RICE) 2016 capex guidance is 11% lower compared to its 2015 level.


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