Chesapeake Energy Corporation (NYSE:CHK): A Long-Term Play


Chesapeake Energy Corporation (NYSE:CHK) recently reported first quarter results. The company’s revenue increased by a whopping 41% to $2.75 billion on year-over-year basis, thanks to the recovery in oil prices. For the first quarter in two years, Chesapeake Energy Corporation (NYSE:CHK) reported a net profit ($75 million). The stock has lost about 6.26% over the last six months.

Chesapeake Energy Corporation (NYSE:CHK) has successfully cut its production cost to deal with the uncertainty in the industry. Last year, Chesapeake’s production cost was just $3.05 per barrel of oil equivalent (BOE), one of the lowest in the industry. In the first quarter, the company further reduced this expense to $2.84 per BOE. For full fiscal 2017, Chesapeake Energy Corporation (NYSE:CHK) expects to cut its expense by 15% as compared to last year. The company is also looking forward to increase its production by 4%. The company said during the earnings call that its oil production will increase significantly in the second half of the year after it brings several oil wells online. By the end of this year, Chesapeake Energy Corporation (NYSE:CHK) expects oil production of 100,000 barrels per day, a 20% increase from production recorded in the first quarter.

Chesapeake Energy Corporation (NYSE:CHK) is also working to fix its debt problem. The company brought down its debt to $9.27 billion in the first quarter. In the first quarter of 2016, Chesapeake’s debt was $10.4 billion. The company also reported positive cash flow of $99 million in the first quarter, compared to the negative cash flow reported in the fourth quarter of 2016.

But some analysts think that Chesapeake Energy Corporation (NYSE:CHK) management is too optimistic about the future of oil prices. In the first quarter earnings report, the company projected future figures based on $60 per barrel price. However, several analysts are hopeful about the oil prices. Last week, Goldman Sachs’ head of commodities Jeff Currie said in a conference in London that the market is already in a supply deficit, and investors should go long on crude oil.

In a report Georgia-based SunTrust Banks Inc. reiterated their “Buy” rating on Chesapeake Energy Co. (NYSE:CHK). The bank has a price target of $9.00 for the energy company.

Macquarie analysts Paul Grigel and Matt Henske recently said in a report that Chesapeake is taking big measures to turn around its business in a volatile market, and big changes take time.