Chesapeake Energy Focus on Natural Gas Leads to Strong Results
Chesapeake Energy (NASDAQ:CHK) is one of the latest oil and gas companies to deliver strong earnings. On the heels of reports from “big oil” companies such as Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVK), Chesapeake showed that the little guys are getting a piece of the action as well.
At a time when energy stocks are under siege for their record-breaking profits, Chesapeake Energy is focusing its efforts on delivering natural gas here at home as well as abroad. In fact, the company recently announced that it was cutting about 3% of its workforce as it exits oil-producing properties.
Demand for natural gas is expected to remain high as long as the war in Ukraine goes on. And that means that despite being up 61% for the year, this may still be a time to scoop up some shares of CHK stock.
What Did the Earnings Report Say?
The independent exploration and production company delivered revenue of $2. 99 billion in the quarter. This was significantly higher than analysts’ expectations of $2. 05 billion. The company delivered $5. 06 in adjusted earnings per share (EPS), which was above estimates of $4.48.
Both numbers were significantly greater year-over-year. The earnings number was also higher than the previous quarter. Revenue, however, came in 15% lower than the prior quarter. Not all the news was positive. Chesapeake did reduce its full-year earnings outlook. The company now forecasts adjusted earnings between $4. 45 and $4. 55 billion. The earlier guidance was for a range between $4.8 billion and $5.0 billion.
The Natural Gas Market is Changing
Russia’s war on Ukraine is changing the trade routes for natural gas between Europe and Russia. These changes could be lasting. Alternative energy options may be the future but natural gas will continue to be the fuel choice for the next five year. This is the opinion of the Business Research Company. In its Natural Gas Global Market Report 2022, the business research firm predicts the size of the natural gas market will grow by 11% this year to $0. 94 trillion. And the market will continue to grow at a compound annual growth rate (CAGR) of 6.9% through 2026. This will increase the market’s size to $1. 23 trillion. Some of this growth will be due to Europe receiving natural gas from the United States. The market for liquefied petroleum gas (LNG), is growing. This market was not dominated by Chesapeake. However, in June 2022, the company hired a liquefied natural gas (LNG) adviser to help the company expand into this fast-growing market. And, in its most recent earnings presentation, Chesapeake noted that it is targeting 15% to 20% of the total company volumes to be in the form of LNG.
CHK Stock Remains a Buy
Chesapeake Energy may not be lowering the price that consumers pay at the gas pump. It may not be able do much to lower the cost of natural gas this winter. It will still play an important role in keeping natural gas flowing.
At the time of this writing, CHK stock is about 7% below the consensus forecast of analysts tracked by MarketBeat. However, the company just got a price target increase from $120 to $130 by the Royal Bank of Canada (NYSE:RY). After other analysts weigh-in, the consensus price will likely go higher and so will the chance to profit from taking a stock position.