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Will Chesapeake Energy's 4Q17 Earnings Impact Its Stock?

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Part 2
Will Chesapeake Energy's 4Q17 Earnings Impact Its Stock? PART 2 OF 5

Chesapeake Energy’s Production Expectations

4Q17 production guidance

For 4Q17, Chesapeake Energy (CHK) has provided a production guidance of 593 Mboe/d (thousand barrels of equivalent per day). In 4Q16, Chesapeake Energy reported production of 574.5 Mboe/d—a year-over-year increase of 15% and a sequential increase of 10% adjusting for asset sales.

Chesapeake Energy’s Production Expectations

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In a press release on February 6, 2018, Chesapeake Energy’s management noted that strong oil production from its Eagle Ford operations and higher natural gas production from its Marcellus and Haynesville operations will drive the increased production.

The company is forecasting oil volumes of 100,000 barrels of oil per day in 4Q17—compared to oil volumes of ~90,400 barrels of oil per day in 4Q16. Higher volumes could result in higher 4Q17 oil revenues, which could be another reason for higher revenue estimates in 4Q17—compared to 4Q16.

Fiscal 2017 and fiscal 2018 production guidance

For fiscal 2017, Chesapeake Energy’s production guidance range is 532 Mboe/d–545 Mboe/d. In regards to Chesapeake Energy’s 2018 production expectations, management said, “We currently forecast our 2018 production to build throughout the year, ultimately resulting in flat production growth on a year over year basis, but with lower capital spending.”

More asset sales

Management also noted that it signed three separate sales agreements in 4Q17 and 1Q18 for its properties in the Mid-Continent for ~$500 million. One of the dispositions had already closed as of January 2018, while the other two dispositions haven’t closed. The other dispositions are expected to close by the end of 2Q18. Chesapeake Energy intends to use the proceeds from these divestitures to reduce its debt.

Management said, “We will continue to pursue additional asset divestitures in 2018 to further reduce debt and interest expense burden.”

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