This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Chesapeake Energy Is Making Progress

Stocks in this article: CHK

On the profits side, Chesapeake was hot. Net income was $15 million, or 2 cents per share. This compares favorably to last year's net loss of $71 million, or 11 cents per share. When excluding some one-time items, profits soared impressively to 30 cents per share, burning estimates by 5 cents.

It's hard not to be impressed by these numbers given the embarrassment this company suffered through thanks to its former CEO, Aubrey McClendon, whose tenure ended abruptly for legal reasons. It's worth noting here that it was McClendon's vision of the shale basins and their growth potential that is still paying off handsomely for Chesapeake today.

Nevertheless, there's a new sheriff in town -- albeit on an interim basis. Steven Dixon is now serving as acting CEO until a permanent replacement is found. Given how well Chesapeake performed this quarter, Dixon deserves plenty of credit, especially from the standpoint of profitability, helped (in part) by aggressive expense controls this quarter where costs fell almost 20% year over year.

Here's something else to consider: The fact that the company uses techniques like drilling multiple wells from a single drilling pad to increase efficiency demonstrates the commitment Chesapeake now has towards profitability. But I wonder how long the company can look at efficiency strategies such as this while also maintaining a healthy balance of increasing output.

To say it more plainly -- although I appreciate the company has heavy debt burdens to the extent of more than $13 billion in long term maturities, production growth can only come from spending. Perhaps this is what the Street has realized given the 16% decline that the stock has suffered since peaking at just under $23 per share.

Bottom Line

If there are any legitimate concerns about Chesapeake today, it centers more on the health of the overall sector and not so much about the company's performance. Chesapeake is in a business that presents a critical need and, eventually, the costs of natural gas and shale demand will normalize.

In the meantime, there will be short-term volatility in the stock. Still, at today's prices, Chesapeake seems fairly valued.

At the time of publication, the author held no position in any of the stocks mentioned.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • 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 Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs