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Chesapeake’s 2Q misses Wall Street expectations, but revenue beats forecast

OKLAHOMA CITY (AP) — Chesapeake Energy Corp. (CHK) on Tuesday reported second-quarter net income of $98 million, after reporting a loss in the same period a year earlier.

The Oklahoma City-based company said it had net income of 5 cents per share. Losses, adjusted for non-recurring gains, were 10 cents per share.

“Driven by the integration of our Brazos Valley asset, steady growth from the PRB and improved base production performance from South Texas and the Mid-Continent, Chesapeake produced approximately 122,000 barrels of oil per day, the highest quarterly oil production in the company’s history, and oil production comprised approximately 25% of our total production mix, also a company record,” said Doug Lawler, Chesapeake’s president and CEO. “ … [W]we have a significant oil growth runway in 2019 and accordingly, we are raising the mid-point of our full-year oil production guidance by approximately 250,000 barrels. In addition, our focus on cash cost leadership has resulted in reducing our full-year guidance for GP&T and production expenses. We believe the trajectory of our oil volume growth and related higher-margin cash flow from those volumes will move higher as we enter 2020.

“As we formulate our initial 2020 plans, we expect to allocate more capital to oil growth areas, with less capital going toward our gas assets. As a result, with an approximately flat capital program to 2019, we project our 2020 oil volumes will show double-digit percentage growth over 2019, while our gas volumes will show a double-digit percentage decline, yet our projected adjusted EBITDAX remains approximately the same at 2019 levels using today’s lower NYMEX strip pricing and current hedge position. We look forward to driving further value from our scale, diverse portfolio and capital discipline in 2020 and beyond.”

The company said it is evaluating options to be a shipper on a crude pipeline that will deliver the company’s Brazos Valley oil volumes into the Houston market beginning in the 2020 fourth quarter. It is also pursuing a new gathering agreement in the Brazos Valley area that would reduce the current reliance on trucking oil volumes and improve its cost structure in the region. The company expects to have this new gathering agreement in place for the operating area during the second half of 2019, according to its quarterly news release.

The results missed Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for a loss of 7 cents per share.

The natural gas company posted revenue of $2.37 billion in the period. Its adjusted revenue was $1.45 billion, beating Street forecasts. Four analysts surveyed by Zacks expected $1.16 billion.

The company’s shares closed at $1.56. A year ago, they were trading at $4.46.

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