Chesapeake Energy Q1 revenue miss failed to impress the street

Chesapeake Energy (CHK) reported disappointing results for the first quarter resulting in the stock plunging 5% in the pre-market trading. The energy giant missed estimates on the top line, hurt by lower production and lower sales from the natural gas and NGL. However, adjusted earnings, excluding non-recurring items, came in line with consensus. The company’s stock price has increased by about 32% this year helped by strong fourth quarter results and WildHorse deal.

For the first quarter, average production stood at 484,000 boe compared to 554,000 boe reported last year. Last year’s production stats benefitted from 126 boe from divested assets, which is not available this year. Oil production improved 19% to 109 barrels/day, but the average price per barrel was down 10.5% to $57.80 over $64.61 in the prior year due to lower price realizations from all its assets.

Commenting on the Q1 results, CEO Doug Lawler said, “With our transformational oil growth and capital efficiency continuing to improve, our confidence is strong as we drive towards achieving our strategic priorities of meaningful margin enhancement, sustainable free cash flow and a net debt to EBITDAX ratio of two times.”

Revenue declined 13% to $2.19 billion mainly due to lower sales from natural gas and impact from unrealized losses. Excluding non-recurring items, adjusted EPS came in at $0.14 compared to $0.34 in the prior year period. Analysts were expecting sales of $2.35 billion and non-GAAP earnings of $0.14 per share.

At the end of the first quarter, the debt stood at $9.9 billion compared to $8.16 billion last year. The surge in debt is primarily due to the WildHorse deal done in February. Chesapeake reaffirmed today that it’s on track to deliver oil growth of around 32% with a year-end oil mix of about 26%.

For the full year, capital expenditures are revised downwards to $2.1 billion to $2.3 billion compared to the prior guidance of $2.3-2.5 billion. Average daily production is expected to be between 475,000 to 505,000 boe with oil production forecasted in the range of 42.5 to 44.5 mmbbls.

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