Chesapeake Vitality: Pure-play US pure gasoline inventory to think about (NASDAQ:CHK)


oil drilling rigs



Oklahoma Metropolis-based Chesapeake Vitality Company (NASDAQ: NASDAQ: CHK) introduced the second quarter of 2022 on Might 4, 2022.

Remark: This text is an replace of my article printed on June 19, 2022. I’ve Adopted CHK On In search of Alpha from December 2019.

CHK is an important oil and gasoline exploration and manufacturing firm that produces belongings within the prolific Marcellus, Haynesville, Powder River and Eagle Ford shale performs.


CHK Map Presentation (CHK Presentation)

Chesapeake Vitality is classifying its oil-producing acreage at Eagle Ford as a non-core enterprise in a shift towards gasoline and offers with LNG exporters to focus its vital shale gasoline performs in the USA. does.

Chesapeake President and CEO Nick Dell’Osso stated:

Provided that we now view our Eagle Ford belongings as non-core to our future capital allocation technique, we wish to place our belongings for return-driven progress within the second half of the yr and into 2023. growing capital allocation to Haynesville,


“Chesapeake is doubling the provision alternatives for pure gasoline and US LNG export services as Europe scrambles to get its arms on LNG cargo and scale back dependence on pipeline gasoline from Russia.”

An vital ingredient to think about with respect to CHK is its beneficiant dividend coverage. The corporate paid a quarterly dividend of $2.32 for a 9.3% yield.


CHK Dividend Willpower Presentation (CHK Presentation)

Remark: Chesapeake Vitality accomplished its acquisition of Vine Vitality Inc. on November 1, 2021. This acquisition boosted CHK’s place within the Haynesville Shale, which justifies the massive gasoline manufacturing growth since 1Q22.

1 – 2Q22 Outcomes Snapshot

Chesapeake Vitality Corp. reported second-quarter earnings of $1,237 million after saying a lack of $439 million in the identical interval a yr in the past.

The corporate posted earnings of $8.27 per share, with adjusted earnings for non-recurring prices of $4.87 per share in comparison with $1.64 a yr in the past. The outcomes beat Wall Road’s expectations.

Complete income was $3,499 million, and income, together with revenue on the sale of belongings, was $4,455 million. A big unfavorable earnings merchandise was “oil and pure gasoline derivatives” with a lack of $2,639 million in 2Q22.

Lastly, Chesapeake Vitality Company introduced a $2.32 per share dividend in 2Q22 and continues to purchase again shares.

Under are highlights from the presentation:


CHK 2Q22 Highlights (CHK Presentation)

CEO Nick Dell’Osso stated within the convention name:

We continued to execute our enterprise within the second quarter, producing very robust money circulation via our capital environment friendly progress. The combination of Vine and Chief into our portfolio has been profitable and has contributed to offering the Firm with robust money circulation and returning significant capital to our shareholders within the type of dividends and buybacks.

2 – Inventory Efficiency

CHK is up 64% on a one-year foundation and has considerably underperformed Coterra Vitality (CTRA) and the UNG exchange-traded fund (“ETF”).

Information by YCharts

Chesapeake Vitality — 2Q22 Quarterly Monetary Desk: Uncooked Numbers

Chesapeake CHK 2Q21 3Q21 4Q21** 1Q22 2Q22
Complete Income $ Million 691 887 1,131 656 3,520
internet revenue in $ million -439 -345 5,678 -764 1,237
EBITDA $ million -421 -338 5,838 368 1,801
EPS diluted in $/share -4.48 -3.51 11.13 -6.32 8.27
working money circulation in $ million 394 443 388 853 909
CapEx in $ million 149 178 143 344 415
free money circulation in $ million 245 265 245 509 494
Money and Money Equivalents $ Million 612 849 905 19 17
Lengthy Time period Money owed (Together with Quick Time period) in Billion {Dollars} 1.261 1.259 2.278 2.774 3.046
million. Excellent (diluted) shares in 97.93 98.22 128.85 120.81 149.53
Quarterly Dividend $per Share 0.3438 0.4375 1.7675 2.34 2.32
oil equal manufacturing 2Q21 3Q21 4Q21 1Q22 2Q22
Ok Boepd. oil equal manufacturing in 433 436 435 620
$/Boe . Realized Equal Worth of Oil in (mixture) 22.64 29.14 22.46 23.79

Supply: Chesapeake Vitality 10-Q and enjoyable enterprise

** Throughout 4Q21, Chesapeake Vitality break up the quarter into two durations:

  1. The interval from 1 January 2021 to 9 February 2021.
  2. The interval from 10 February 2021 to 31 March 2021.

Evaluation: Income, Free Money Move, Internet Debt, and Oil & Fuel Manufacturing

1st – Quarterly Income and Others 2Q22 . was $3,499 million in


CHK Quarterly Income Historical past (enjoyable buying and selling)

Chesapeake reported internet revenue of $1,237 million, or $8.27 per diluted share, in 2Q22. Complete income was $2,790 million, and income, together with revenue on the sale of belongings, was $3,499 million.

Internet revenue totaled $1,237 million, or $8.27 per diluted share, with adjusted internet revenue of $729 million, or $4.87 per diluted share.

Chesapeake Vitality is positioning the Haynesville asset for future progress whereas curbing exercise at Eagle Ford, which is taken into account non-core to its future capital allocation technique.

This exceptional progress is facilitated by a greater outlook for pure gasoline in 2022.

2 – 2Q22 . Free money circulation was $494 million in


CHK Quarterly Free Money Move Historical past (enjoyable buying and selling)

Strange free money circulation is money from working actions minus CapEx.

The trailing 12 months of free money circulation (“ttm”) is estimated at $1,513 million. Quarterly free money circulation for 2Q22 was $494 million.

CHK has retired roughly $670 million, or roughly 7.6 million widespread shares, as of July 31. The $2 billion widespread inventory and warrant repurchase program stays lively.

3 – 2Q22 . Internet debt is $3.03 billion in


CHK Quarterly Money Vs Mortgage Historical past (enjoyable buying and selling)

The corporate stories complete debt of $2.046 billion and money and money equivalents of $17 million. Internet debt as of June 30, 2022 is $3.029 billion.


CHK Mortgage Profile (CHK Presentation)

4 – Quarter Manufacturing 2Q22 . was 4,125 MMCfe/d or 687.7K Boep/d

4.1 – Manufacturing for the quarter was 687.7K Boep/d (4,125 MMCfe/d), up 58.8% from the identical quarter a yr in the past and up 11% sequentially.


CHK Quarterly Manufacturing Historical past (enjoyable buying and selling)

4.2 – The per MCF (composite) worth stood at $7.43 from $3.77 a yr in the past.

4.3 – Under is the output in 2Q22 in Ok Boep/d per basin. The corporate produces from three areas in the USA, with oil manufacturing at Eagle Ford.


2Q22 . CHK manufacturing per basin in (enjoyable buying and selling)

4.4 – Chesapeake Vitality is a home gasoline producer representing 90.4% of complete manufacturing for the second quarter of 2022.


2Q22 . Manufacturing particulars in CHK (enjoyable buying and selling)

5 – 2022 steerage


CHK Steerage 2022 (CHK Presentation)

Chesapeake Vitality expects full-year 2022 common each day manufacturing to be roughly 4,020-4,140 MMCfe/d. The corporate’s deliberate CapEx for 2022 is $1,750-$1,950 million.

CEO Nick Dell’Osso stated within the convention name:

[W]E has recognized a transparent path to extend Haynesville’s capability by the second half of 2023 and intends to extend its rig rely from 5 to seven by the top of the yr, permitting us to match our manufacturing progress. capability enlargement. In the end, we plan to ship 5% to 7% progress from the top of 2022 to the top of 2023.

Technical Evaluation (Quick Time period) and Commentary


CHK TA chart brief time period (Humorous Buying and selling Inventory Charts)

CHK is forming an ascending triangle sample with resistance at $105 and assist at $95. The ascending triangle sample is taken into account to be a bullish formation, which implies that we’re more likely to cross the $105 resistance space.

The buying and selling LIFO technique that I typically advocate in my market, “The Gold and Oil Nook,” is to promote about 40% at or above $105 and commerce between $93 and $95 for potential decrease assist at $84. Have to think about submitting collectively.

Pure gasoline is powerful, however the world economic system is weakening and will enter a interval of recession by the top of 2022. The Fed is predicted to boost rates of interest by 75 factors on September 22, and we might even see some selloff in power. area. On this case, CHK may drop to between $84-$80.

Remark: The LIFO technique is prohibited beneath Worldwide Monetary Reporting Requirements (IFRS), though it’s permitted in the USA by typically accepted accounting rules (GAAP). Due to this fact, solely US merchants can apply this technique. Those that can not commerce LIFO can train an possibility by establishing two separate accounts for a similar inventory, one for the long run and the opposite for the brief time period commerce.

Warning: The TA chart have to be up to date regularly to be related. That is what I’m doing in my inventory tracker. The chart above has a possible validity of about one week. Keep in mind, TA chart is simply a software that can assist you undertake the correct technique. This isn’t the best way to see the long run. Nobody else can do something.

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