Why Is Chesapeake (CHK) Down 27.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Chesapeake Energy (CHK). Shares have lost about 27.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Chesapeake due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Chesapeake Q4 Earnings Beat Estimates, Revenues Miss

Chesapeake Energy Corporation (NYSE:CHK) reported fourth-quarter 2019 loss per share (excluding special items) of 4 cents, narrower than the Zacks Consensus Estimate of a loss of 6 cents. However, in the year-ago quarter, the company had reported a profit of 3 cents.

Operating revenues amounted to $969 million, down from $1,731 million in the year-ago quarter. Moreover, the top-line missed the Zacks Consensus Estimate of $1,212 million.

The narrower-than-expected loss was a result of higher oil equivalent production. Lower price realizations of commodities partially offset the positive.

Operational Performance

Total Production Increases

Chesapeake’s production in the reported quarter was approximately 44 million barrels of oil equivalent (MMBoe), up from 43 MMBoe a year ago. The total production comprised 12 million barrels (MMbbls) of oil (up 50% year over year), 178 billion cubic feet of natural gas (down 4%) and 3 MMbbls of natural gas liquids or NGLs (down 25%).

Price Realizations Plunge

Oil equivalent realized price — exclusive of gains (losses) on derivatives — was $25.17 per barrel, down from $29.64 a year ago. Oil price was $57.48 per barrel, down from $62.98 in the year-ago quarter. Moreover, natural gas prices declined to $2.24 per thousand cubic feet from the year-ago level of $3.59. Average sales price of NGLs was recorded at $16.05 per barrel in the quarter compared with $25.11 a year ago.

Operating Expenses

Total operating costs in the fourth quarter declined to $2,099 million from $2,375 million in the prior-year quarter. However, quarterly production expenses per Boe increased to $2.86 from $2.48 in the year-ago period.

Capital Expenditure

Total capital expenditure increased to $487 million in the fourth quarter from $476 million in the year-ago quarter, primarily due to a rise in drilling and completion capital spending.

Balance Sheet

At the end of the quarter under review, Chesapeake had a cash balance of $6 million. Net long-term debt was $9,073 million, leading to a debt-to-capitalization ratio of 67.3%.

Guidance

Chesapeake expects oil equivalent production for 2020 in the range of 161 to 173 MMBoE. Notably, in 2020, the company is planning to invest capital in the range of $1,325 to $1,625 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -92.86% due to these changes.

VGM Scores

Currently, Chesapeake has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Chesapeake has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.