Chesapeake Energy Case Summary

There is no denying the fact that the weakness in oil and gas prices has taken a heavy toll on Chesapeake Energy (CHK). This is clearly reflected from the fact that Chesapeake shares have lost almost 70% of their value this year as its financial performance has degraded on the back of weak pricing.
Looking past the weakness
For instance, earlier this month, when Chesapeake released its third-quarter 2015 results, it reported a net loss of $4.7 billion attributable to common stockholders as compared to a net income of $169 million in the third quarter of last year. The adjusted net loss attributable to the common stockholders was $83 million, or $0.05 per share, down from the adjusted net income available to common stockholders of $251 million, or $0.38 per share in the third quarter of last year. The adjusted EBITDA in the quarter was also down substantially to

But, the company has been able to control the drop in its bottom line to a large extent as the chart given above clearly shows. This can be attributed to the impressive cost-cutting efforts that are being undertaken by Chesapeake Energy. In fact, I believe that Chesapeake is gradually positioning itself to thrive in a low oil and gas price environment. Let’s see how.
Operational improvements are a green flag
Chesapeake’s operational highlights include its success in improving completion efficiency as a value differentiator by being able to keep capital costs under control. The company has made a significant improvement in its recoverable reserves per well and also the associated productivity per well. One example of this is in the Eagle Ford, where Chesapeake expects to achieve about 9% production growth this year as compared to last year despite reducing its capital investment by