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Chesapeake Energy Still Working to Overcome Doubts

NEW YORK (TheStreet) - Since reaching a low of $19.32 in June, shares of Chesapeake Energy (CHK - Get Report) have been on fire, soaring over 30% and outpacing rivals including Anadarko (APC) and Apache (APA), two energy giants that have been perceived as better-managed natural gas producers.

While Chesapeake seems like a different company today, helped (in part) by the arrival of a new CEO, Chesapeake is still working to shed its former image of a "high-risk gambler." But as cavalier as the company might have been perceived to be with past capital spending, Chesapeake has won way more than it has lost. Like it or not, this is a fact the Street needs to accept.

It's true that the company is no longer wielding its large checkbook trying to outbid rivals for natural gas. But the company is still capable of producing decent returns, given that management's capital allocation and divestment goals are ahead of schedule. So, despite Chesapeake's strong gains over the past four months, I still believe these shares present strong long-term value on the basis of improved profitability.

The natural gas industry is still marred by weak prices and limited reserves, so not much was expected from Chesapeake in the third quarter. Although revenue growth is one of the key performance indicators for most sectors, that's not the case for energy and gas. Important to consider before discussing Chesapeake's impressive revenue number, which jumped 64% year over year.

I don't want to downplay the significant of the revenue results, which beat Street estimates by a convincing margin. What matters more in this sector is production growth. This is where I believe the new management team is beginning to make a difference. Chesapeake opponents will look at the company's report and raise an eyebrow, especially given Anadarko's 12% production output. Still, it takes more than just a casual glance to appreciate Chesapeake's results.

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