Chesapeake Energy falls following 2014 outlook
NEW YORK (AP) — Chesapeake Energy shares skidded Thursday after the oil and gas company gave its outlook for production and spending in 2014.
THE SPARK: Chesapeake said its total production should grow between 2 and 4 percent, meaning it expects to produce 680,000 to 695,000 barrels of oil equivalent per day. Excluding lost production from assets the company sold off, it said oil production will rise 8 to 12 percent, natural gas liquid production will increase 44 to 49 percent, and natural gas production is expected to grow 4 to 6 percent.
THE BIG PICTURE: The Oklahoma City company said it expects $5.2 billion to $5.6 billion in capital spending for the year, which represents a drop of about 20 percent from its estimates for 2013.
Chesapeake Energy sold billions of dollars in assets in 2013 as part of a plan to reduce its leverage and improve liquidity. The company sold about $3.6 billion in assets over the first three quarters of the year. It hasn't reported its fourth-quarter results yet but it expects to sell another $600 million worth of assets during the final period of 2013.
Chesapeake plans to report its fourth-quarter earnings Feb. 26.
THE ANALYSIS: Stifel Nicolaus analyst Amir Arif said the company's forecast for oil production growth was lower than he expected, although its overall production estimate was higher. Arif said the company is becoming more efficient and reducing its spending, but said he feels other stocks in the sector are better investment opportunities.
He maintained a "Hold" rating on the stock and said he now thinks Chesapeake Energy will report net income of $1.59 per share in 2014, down from his previous estimate of $1.99 per share.
FactSet says analyst expect $1.68 per share on average.
SHARE ACTION: Shares of Chesapeake Energy Corp. fell $1.80, or 6.9 percent, to $24.42 Thursday. The stock is up 34 percent since June 24.