Chesapeake Energy Corporation Reports Financial and Operational Results for the 2012 Second Quarter

Chesapeake Energy Corporation (NYSE:CHK) today announced financial and operational results for the 2012 second quarter. For the 2012 second quarter, Chesapeake reported net income to common stockholders of $929 million ($1.29 per fully diluted common share), ebitda of $2.385 billion (defined as net income before income taxes, interest expense, and depreciation, depletion and amortization) and operating cash flow of $895 million (defined as cash flow from operating activities before changes in assets and liabilities) on revenue of $3.389 billion and production of 347 billion cubic feet of natural gas equivalent (bcfe).

The company’s 2012 second quarter results include various items that are typically not included in published estimates of the company’s financial results by certain securities analysts. Excluding such items for the 2012 second quarter, Chesapeake reported adjusted net income to common stockholders of $3 million ($0.06 per fully diluted common share) and adjusted ebitda of $803 million.

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The primary excluded items from the 2012 second quarter reported results are a net after-tax gain on investments of $584 million, primarily related to the sale of all of the company’s interests in Access Midstream Partners, L.P. (NYSE:ACMP; formerly named Chesapeake Midstream Partners, L.P.), unrealized noncash after tax mark to market gains of $490 million resulting from the company’s oil, natural gas liquids (NGL) and natural gas and interest rate hedging programs and a noncash after tax charge of $148 million related to the impairment of certain of the company’s property and equipment.

A reconciliation of operating cash flow, ebitda, adjusted ebitda and adjusted net income to comparable financial measures calculated in accordance with generally accepted accounting principles is presented on pages 20 – 24 of this release.

Read the entire CHK earnings report

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What is T. Boone Pickens Buying?

Crude oil may have sold off hard recently, but billionaire investor T. Boone Pickens still loves energy stocks. After all, he made his fortune by investing in energy, so he knows a thing or two about picking winners among the oil, natural gas and power producers. Recently, BP Capital released its holdings as of March 31, 2012 in a 13F filing. Let’s take a closer look at some of its most bullish bets.

Top 10 Holdings

Company	Ticker	Value ($000s)	Activity
BP PLC	BP	20,345	12%
ENCANA CORP	ECA	18,392	New
NATIONAL OILWELL VARCO INC	NOV	14,262	0%
DEVON ENERGY CORP NEW	DVN	13,513	36%
TRANSOCEAN LTD	RIG	13,068	47%
CHESAPEAKE ENERGY CORP	CHK	11,563	-12%
WEATHERFORD INTL LTD NEW	WFT	10,489	35%
SANDRIDGE ENERGY INC	SD	9,250	0%
DAWSON GEOPHYSICAL CO	DWSN	8,426	0%
SUNCOR ENERGY INC NEW	SU	7,063	0%

Encana Corp (ECA) is a new position in BP’s portfolio – the fund did not report owning any shares of Encana at the end of 2011 – but it is one of its largest holdings. During the first quarter of 2012, BP initiated a new position in the company worth $18 million. A few other hedge funds also have Encana in their 13F portfolios. At the end of last year, there were 19 hedge funds reported to own this stock. Steven Cohen’s SAC Capital Advisors had nearly $100 million invested in Encana at the end of last year. Martin Whitman and Ken Griffin are also bullish about this stock. See chart below.

Pickens likes Devon Energy Corp (DVN) as well. The stock is the fourth largest position in his latest 13F portfolio. Pickens boosted his stakes in Devon by 36% over the first quarter to $190 million. Devon is also quite popular amongst the other hedge funds we track. There were 32 hedge funds with positions in Devon at the end of last year. Devon has also shifted its focus from natural gas to oil and natural gas liquids. We think Devon is well positioned to benefit from the higher margins of liquids.  See chart below. 

Of course, just because BP Capital is natgas and alternative energy-heavy doesn’t mean that Boone Pickens’ fund is eschewing traditional oil firms. His fund picked up 188,000 shares of Valero Energy (VLO) last quarter, building up a $5 million stake in the country’s largest independent oil refiner. Valero has the capacity to process more than 2.8 million barrels of crude per day through its 14 refineries, in addition to a massive ethanol business and a 1,000-unit gas station business. See Chart below.

Pickens stuck to his strong suit in energy with new picks Encana (ECA), Calpine (CPN), Exelon (EXC), Valero (VLO), and NRG Energy (NRG). He also added to BP Plc (NYSE:BP), Devon Energy (NYSE: DVN), Transocean, and Weatherford International LTD. 

Other large positions in Pickens’ portfolio are BP Plc (BP), National Oilwell Varco Inc (NOV), and Transocean Ltd (RIG). Pickens did not increase or decrease his stakes in National Oilwell. He increased his BP position by 12% and his Transocean position by 47% over the first quarter. All of these stocks have attractive valuation levels, especially BP. It is currently trading at only 5.6x its 2013 earnings and has a dividend yield of 5.12%. 

BP is the most popular oil company among hedge funds, followed by Exxon Mobil. Value investor Seth Klarman had a $400+ million position in the stock at the end of the first quarter. Billionaires Ken Fisher and Ken Griffin are among the fund managers with large XOM positions. They both boosted their stakes in XOM during the first quarter. See chart below.

Posted courtesy of  Turn Key Oil.Com


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Chesapeake's New Chair to be Named

Chesapeake Energy's new chairman and additional directors will be named by Friday, reports CNBC's Kate Kelly.



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Carl Icahn Bought Chesapeake Energy, Should You?

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Last week, it was announced that corporate raider Carl Icahn was up to his usual antics, acquiring a 7.6 percent activist stake in the natural gas E&P giant Chesapeake Energy Corp (NYSE: CHK). In a move that makes him the company’s third largest shareholder, Icahn bought 50 million shares of CHK worth nearly $800 million between April 19th and May 24th. Icahn has pledged to make a host of changes within Chesapeake, beginning with his appointment of four new board members. In the longer term, it is expected that he will look for CHK to shore up its troubled business model, which has led to cash flow shortages, and large declines in shareholder wealth. Over the past year, the company’s stock has lost nearly 50 percent, having recently hit a post recession low below $14 a share. The everyday investor may be wise to consider following Icahn into Chesapeake now, due to stock’s undervaluation, strong earnings growth, and future expansion potential.

One thing that sets this E&P operator, which stands for exploration and production, apart from its competitors is its dominance in the unconventional natural gas arena. In layman’s terms, unconventional natural gas is not extracted from traditional well based platforms; instead, it is gathered in a less economical manner.
 In CHK’s case, it extracts natural gas from six distinct sources.....

(1) gas below 15,000 feet underground
(2) gas trapped in sandstone or limestone
(3) shale deposits
(4) coalbed methane
(5) geopressurized gas
(6) methane hydrates.

 The latter is the newest form of natural gas in Chesapeake’s energy staple. From a macroeconomic standpoint, unconventional natural gas usage has nearly doubled in the past decade, and currently comprises 42 percent of all natural gas production in the U.S. It is estimated that this figure will reach 64 percent by 2020, driven by growth in the shale and coalbed markets.

Looking at its income statement, CHK has seen revenues remain stagnant since the recession, though the industry’s average has actually shrank during this time period, as it has yielded a 3-year average growth rate of -2.8 percent. More notably, competitors like Devon Energy (NYSE: DVN) at -6.2 percent, Anadarko Petroleum (NYSE: APC) at -2.7 percent have also experienced shrinking revenues, though EOG Resources (NYSE: EOG) and Apache Corp (NYSE: APA) have seen positive top line growth. From an earnings standpoint, CHK has been more impressive, generating a 3-year average EPS growth of 35.6 percent, higher than the industry average (-5.4%) and peers DVN, APC, and EOG.

From a valuation standpoint, CHK is undervalued, as it currently sports a P/E ratio (6.4X) below the industry average (16.3X), and it’s own 10-year historical average (13.5X). Moreover, shares of CHK have historically traded at a 20 percent discount relative to the S&P’s average over the past decade. This year, the stock is cheaper than usual, trading at a 58 percent discount. Using the industry average P/E in conjunction with a modest year-ahead EPS forecast of $1.80, we can set a target price of $29.34 by next spring.

It should also be pointed out that Chesapeake has had a host of cash flow problems, reporting negative free cash flows of at least -$3.0 billion since 2007. Interestingly, the company reported recently that it was expecting a positive FCF in 2012, due to sales of assets in its Mississippi Lime, Permian Basin, and Texas Panhandle Granite Wash regions. Icahn and other CHK shareholders are hoping that these sales can offset historic lows in natural gas prices, and it seems that the markets are responding favorably. Since company execs announced these plans on May 14th, shares of CHK have risen nearly 2 percent.

Looking to the hedge fund industry, CHK has a favorite of mega fund managers like Mason Hawkins, Curtis Macnguyen, John Rogers, and Peter Eichler over the past few years. Moreover, this month’s 13F filings show that funds like Millennium Management, Tetrem Capital Management, and Samlyn Capital increased their holdings in CHK in the first quarter of 2012. Whether its Carl Icahn’s promise to restore shareholder value back to this natural gas E&P, or the stock’s attractive valuation, investors may be wise to consider a long position in Chesapeake (CHK).

Posted courtesy of our friends at Insider Monkey.Com. If you aren't following the hedge funds you should be, and you should be doing it at Insider Monkey.Com

Here is the simple truth about trends

Chesapeake Energy Corporation Releases Letter to Shareholders

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The Board of Directors of Chesapeake Energy Corporation (NYSE:CHK) today released a letter to shareholders addressing certain issues recently raised by the Comptroller of the City of New York, John C. Liu, who oversees New York City pension funds that beneficially own less than 0.25% of Chesapeake’s common shares outstanding. The letter, which outlines numerous recent actions the Board has taken to enhance Chesapeake’s corporate governance and further strengthen its financial position, was issued in advance of the Company’s Annual Meeting of Shareholders to be held Friday, June 8, 2012. The full text of the letter follows:

From May 23, 2012....

Dear Fellow Shareholder:

You may have recently seen a letter from the Comptroller of the City of New York, John C. Liu, who oversees New York City pension funds that beneficially own less than 0.25% of Chesapeake’s common shares outstanding. While the Board of Directors appreciates constructive input from our shareholders, we wish to address issues raised by Mr. Liu and reiterate important steps the Board and Company have been taking as we approach our 2012 Annual Meeting of Shareholders.

CHESAPEAKE’S BOARD HAS IMPLEMENTED SIGNIFICANT COMPENSATION CHANGES AND IMPROVED GOVERNANCE WITH INTENTION TO SEPARATE POSITIONS OF CHAIRMAN AND CEO

Click here to read the entire letter to CHK Shareholders

This should create some controversy, when is the best time of day to profit?

Chesapeake Energy Earnings Report For 1st Quarter 2012

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Chesapeake Energy Corporation (NYSE:CHK) today announced financial and operational results for the 2012 first quarter. For the 2012 first quarter, Chesapeake reported a net loss to common stockholders of $71 million ($0.11 per fully diluted common share), ebitda of $597 million (defined as net income (loss) before income taxes, interest expense, and depreciation, depletion and amortization) and operating cash flow of $910 million (defined as cash flow from operating activities before changes in assets and liabilities) on revenue of $2.419 billion and production of 333 billion cubic feet of natural gas equivalent (bcfe).

The company’s 2012 first quarter results include various items that are typically not included in published estimates of the company’s financial results by certain securities analysts. Excluding such items for the 2012 first quarter, Chesapeake reported adjusted net income to common stockholders of $94 million ($0.18 per fully diluted common share) and adjusted ebitda of $838 million. The primary excluded item from the 2012 first quarter reported results is a net unrealized noncash after tax mark to market loss of $167 million resulting from the company’s natural gas, liquids and interest rate hedging programs. A reconciliation of operating cash flow, ebitda, adjusted ebitda and adjusted net income to comparable financial measures calculated in accordance with generally accepted accounting principles is presented on pages 18 – 20 of this release......Click here to read the entire earnings report

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Hedges Pay Off for Natural Gas Producers

For oil and natural gas companies, the budding crackdown on U.S. energy markets comes at an awkward time. Producers are relying more than ever on the futures markets to hedge the risk that prices will fall, even as regulators take aim at energy traders in an effort to blunt the sort of spikes that hit consumers last year. Recent earnings reports from a number of U.S. companies including El Paso Corp., XTO Energy Inc., and Chesapeake Energy Corp. showed a big boost from deals that locked in high prices for natural gas before that market sank to seven year lows.....Complete Story

Crude Oil Signals Bearish Pricing Possible Near Term

March crude oil was slightly higher overnight due to short covering as it continues to trade sideways to lower off the late January high.

Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.

If March extends the decline, January's low crossing at $39.11 is the next downside target.

Closes above the 20 day moving average crossing at $42.23 are needed to confirm that a short term low has been posted.

Closes above the reaction high crossing at $48.59 are needed to confirm that a trend change has taken place.

First resistance is the 10 day moving average crossing at $40.77.

Second resistance is the 20 day moving average crossing at $42.23.

First support is last Friday's low crossing at $38.60.

Second support is December's low crossing at $38.00.

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