After beginning the year at $16.46 per share, Chesapeake has now posted gains of more than 20% to its current level of around $20.15. That's the good news. Unfortunately, since reaching a high of $22.97 on March 15, the stock has been down 13%, at one point as low at 21%. Frustrated investors began to wonder if the stock peaked.
Given the state of the natural gas industry, still marred by weak prices and limited reserves, the fact the stock is up at all is a meaningful accomplishment in its own right.
Besides, it's not as if Chesapeake has been "lighting it up" in recent earnings. Although the company has made great strides after some regrettable decisions by its former CEO, Chesapeake's future remains highly leveraged to a better-performing natural gas industry. To that end, the first-quarter report was encouraging.Chesapeake reported daily production of natural gas equivalents for the first quarter average roughly four billion cubic feet, which represents a 9% increase year over year and 1% better than the fourth quarter. Management said the production levels included three billion cubic feet per day of natural gas and almost 160 thousand barrels of liquids per day.
With such strong numbers, it came as no surprise to see solid growth in the production of oil and natural gas liquids (NGL). Average daily oil production grew 6% sequentially and a stout 56% year over year, while NGL production advanced 8% sequentially and 14% year over year. Management said the production increases were driven primarily by strong contributions from the Eagle Ford Shale and Greater Anadarko Basin plays. However, the numbers were not as robust across the board. Natural gas was a notable underperformer. Even though Chesapeake only posted a 2% year-over-year increase in natural gas production, which arrived flat sequentially, I'm willing to give the company a pass here. In my view, it was encouraging that there was solid growth in the northern Marcellus Shale play, which offset weakness in the Haynesville Shale play.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV