Chesapeake Energy Corporation (NYSE: CHK) swung to profit in the second quarter from a loss last year, driven by higher oil production mix and a decrease in GP&T and general and administrative expenses. The results benefited from rising oil production, enhancing capital efficiency, growing margins and progressing towards sustainable free cash flow.
Net income was $0.05 per share, compared to a loss of $0.30 per share in the previous year quarter. Adjusted loss narrowed to $0.10 per share from $0.13 per share a year ago.
Revenue rose by 4% to $2.39 billion as higher revenue from oil, natural gas, and natural gas liquids offset declines in marketing revenue.
For the second quarter, average production stood at 496,000 boe compared to 530,000 boe reported last year. Oil production represented about 25% of the company’s 2019 second quarter aggregate production compared to 17% in the 2018 second quarter.
Chesapeake produced about 122,000 barrels of oil per day, the highest quarterly oil production in the company’s history. This was driven by the integration of Brazos Valley asset, steady growth from the PRB and improved base production performance from South Texas and the Mid-Continent.
Chesapeake invested total capital expenditures of about $559 million during the second quarter, compared to about $530 million a year earlier. The increase was largely attributable to an increase in net wells spud, completed and connected.
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Chesapeake is evaluating options to be a shipper on a crude pipeline that will deliver Brazos Valley oil volumes into the Houston, Texas market beginning in the 2020 fourth quarter. Chesapeake is also pursuing a new gathering agreement in the area that would lower the current reliance on trucking oil volumes and improve its cost structure in the region. The company expects to have this new gathering agreement in place for the operating area during the second half of 2019.
Looking ahead, the oil production is poised to increase in the second half of 2019 as about 170 oil wells are expected to be placed to sales, an increase of about 50% over the first half. The company is projected to grow oil production by double-digits in 2020 on about flat year-over-year capex, yielding about flat adjusted EBITDAX at current NYMEX strip pricing and current hedge position.
Shares of Chesapeake Energy ended Monday’s regular session down 4.88% at $1.56 on the NYSE. Following the earnings release, the stock rose over 3% in the premarket session.
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