Chesapeake Energy stock performance
Chesapeake Energy (CHK) stock has been rising following its strong first-quarter earnings and the rally in oil prices. In the week ending May 21, Chesapeake Energy stock increased 28%. Crude oil prices (UCO) have also been strong at over $70 per barrel for almost two weeks.
On a YoY (year-over-year) performance basis, Chesapeake Energy stock has declined ~17%. The Energy Select Sector SPDR ETF (XLE) rose ~16.4% YoY, while the broader market S&P 500 SPDR ETF (SPY) rose ~14% during the same period.
What’s keeping the market happy?
Since Chesapeake Energy reported its first-quarter earnings, its stock has been rising. Chesapeake Energy’s adjusted EPS (earnings per share) in the first quarter was $0.34—higher than Wall Street analysts’ consensus EPS estimate of $0.27. In comparison, the company’s adjusted EPS in the first quarter of 2017 was $0.23.
The company grew its first-quarter production 5% YoY. In 2018, Chesapeake Energy’s production growth guidance range, adjusted for asset sales, is ~3% YoY. The company expects its oil volumes to grow ~5% compared to the levels in 2017.
In the first quarter, Chesapeake Energy’s cash flow from operating and investing activities, including net proceeds from asset sales, was $609 million—the highest in over three years. The higher cash flow enabled the company to reduce its long-term debt by $581 million.
Read Chesapeake Energy’s 1Q18 Production Highlights and Stock Reaction to know more about its first-quarter performance.
Debt is still an issue
Chesapeake Energy’s principal debt balance at the end of the first quarter was ~$9.40 billion—compared to $9.98 billion as of December 31, 2017. While the company is making several efforts to lower its debt, it still has a long way to go. However, rising oil prices (especially oil) helped the company see higher price realizations. Increasing production helped tide over the bankruptcy fears, which sent its stock reeling in 2016.
A key factor that could give Chesapeake Energy stock another boost is natural gas prices (UGAZ) (UNG), which haven’t seen the same rally as crude oil prices. Natural gas prices have declined 11% year-over-year.
Given that Chesapeake Energy is a natural gas–weighted producer (~74% of its first-quarter production was made of natural gas), natural gas prices’ future will weigh heavily on Chesapeake Energy stock.