Chesapeake Energy 3Q17: “Pleased” Production Declined, Loses $41M

Yesterday the 800-pound gorilla in the natural gas space, Chesapeake Energy, issued its third quarter 2017 update. One of the highlights during the analyst phone call was CEO Doug Lawler’s bragging about the “world class” Marcellus Shale. During 3Q17 Chessy drilled and put online two Upper Marcellus wells in Susquehanna County, PA that turned in peak initial flow rates of 29.6 and 29.8 million cubic feet per day (Mmcf/d) of natural gas, which is 50% higher than previous Upper Marcellus wells drilled by Chessy. The company used 3,000 pounds of sand per foot in fracking the wells. On the down side, Chesapeake lost $41 million for the quarter after making $470 million in profit during the previous quarter. However, when compared with the same quarter last year (3Q16), losing $41M ain’t so bad. In 3Q16 Chesapeake lost $1.3 billion. The company’s stock price continues to be low, bumping along in the mid-$3 range ($3.66/share as of this morning when we checked). One odd statement from Lawler on the phone call. He said this: “I’m pleased to report our production has started to decline as forecasted following the previously announced weather-related operational delays experienced during the quarter.” He’s “pleased” production is down?! Yes, the company did previously forecast a drop in production–but how can you be “pleased” with that? Converting all hydrocarbons Chessy produces (natural gas, oil, condensate, NGLs) into barrels of oil per day, Chessy produced 542,000 barrels of oil equivalent per day (boe/d) in 3Q17, versus producing 638,000 boe/d in 3Q16–a drop of 15%. Combining the Marcellus and Utica, Chessy produced 246,000 boe/d in 3Q17 versus producing 261,000 boe/d in 3Q16–down 5.7%. The company currently operates 14 drilling rigs across all plays–two of them in the Marcellus/Utica. Below is the full 3Q17 update, including financials, select portions of the analyst phone call, an updated slide deck, and analysis by Reuters…

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