Replies to post #2484 on Chesapeake Energy Corp (CHK)

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I think Citi thinks Positive...

Q4’15 CFPS Beat; 2016 Guidance Better Than Expected

Chesapeake Energy Corp (CHK)
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* Citi's Take — Chesapeake reported Q4’15 recurring EPS/CFPS of $0.16/$0.55 vs. our $(0.14)/$0.39 estimates and Consensus of $(0.16)/$0.32. Total production of ~659 MBOE/d was below our ~670 MBOE/d forecast but above Street Consensus of 653 MBOE/d. However, oil production was much lower than anticipated. For the first time this quarter, Chesapeake reported GP&T (~$690mm) as a component of operating expense, thus pro-forma revenue was below our forecast despite an MVC payment of ~$171mm (mid-point of guidance). However, this was more than offset by significantly lower operating costs with per-unit LOE and DD&A down ~10% and ~30%, respectively, and aggregate G&A well below expectations.

* As Expected, 2016 Total Budget Slashed 57% Yr/Yr… – Chesapeake issued an initial 2016 E&D budget of $1.0-1.5bn (excl. $300mm for capitalized interest), or down 57% at mid-point versus last year and with the low-end in line with our $1.0bn E&D forecast (plus ~$350mm for capitalized interest; see our February 11th note

<https://ir.citi.com/jJTII%2FMEI1JXmouIttvX5fj2iqT%2BP3J77ULqDnutSsNg%2Fi6UZ%2F3sYg%3D%3D>;).

The vast majority (87%) of the 2016 slate has been earmarked for the Eagle Ford, Haynesville and Mid-Continent STACK plays, and with 70% of the drilling program allocated to well completions, i.e. ~350 wells to be completed vs. 105 wells spud. Roughly one-half of total well completions will be in the Eagle Ford shale play.

* …With Pro Forma Production To Decline 0-5% – As a result, mgmt. expects total pro forma production, i.e. adjusting for divestitures, will decline ~0-5%. At February 23, 2016, the company had inked ~ $500 million net in asset divestitures (Granite Wash & Texas Panhandle) with associated production of ~31 MBOE/d in 2016. This was ahead of expectations of $200-300mm and mgmt. is targeting $0.5-1.0bn in additional divestitures this year.

* Earnings Call – At 9:00am ET. Dial-In: 877-876-9177. Passcode: ###. We will provide further commentary and update our estimates following this morning’s call.

* Implications — Given the bottom-line CFPS beat, greater asset sales than expected and less onerous 2016 guidance than we believe the Street was expecting, we believe CHK shares will outperform the E&P group this morning