CHK  Chesapeake Energy Corporation

Exchange

NYSE

Sector

Energy

Industry

Oil & Gas Production

Market Cap.

5.02B

Vuru Grade

33.62/100

Current Price

$5.66
-0.09 (-1.57%)

Growth Price

$8.65
Undervalued by 52.90%

Company Metrics

  • P/E 1.07
  • P/S 0.65
  • P/B 1.42
  • EPS -33.88
  • Cash ROIC -10.98%
  • Cash Ratio 0.22
  • Dividend 0.00 / 0.00 %
  • Avg. Vol. 45.75M
  • Shares 662.00M
  • Market Cap. 5.02B

Company Description

Chesapeake Energy Corporation, together with its subsidiaries, produces natural gas in the United States. The company focuses on discovering, acquiring, and developing conventional and unconventional natural gas reserves onshore in the United States, primarily in its six natural gas shale plays: the Barnett Shale in the Fort Worth Basin of north-central Texas; the Haynesville and Bossier Shales in... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Chesapeake Energy Cracks On Expected Lines
Seeking Alpha - Feb 24, 2017
Chesapeake Energy (NYSE:CHK) released Q4 numbers yesterday which failed to impress the market. With a revenue miss and an in-line EPS, it looked like the stock will have trouble finding buyers.
Analyst Activity – RBC Capital Markets Reiterates Hold on Chesapeake Energy ... - Market Exclusive
Chesapeake Energy Corporation Reports 2016 Full Year And Fourth Quarter ... - Yahoo Finance
Chesapeake Energy Is A Strong Buy
Seeking Alpha - Feb 18, 2017
As I study the energy space, it appears to me that the best bang for the buck for Total SA may be buying Chesapeake Energy (NYSE:CHK) at a discount. I recently wrote an article about BP plc (NYSE:BP) (which I believe is making a yearly low today ...
Why Smart Investors Buy Chesapeake Energy Today
Seeking Alpha - Feb 18, 2017
The 2017 capital budget calls for higher capital expenditures in 2017, foreshadowing a return to normality and growth. Chesapeake Energy also reinstated convertible preferred stock dividends in January. Growing capex spending and reinstatement of ...
Chesapeake Energy Looks Gassed
Seeking Alpha - Feb 17, 2017
Chesapeake Energy Corp. (NYSE:CHK) is an oil & natural gas exploration and production company. It is one of the larger unconventional oil & natural gas drillers in the US, with 8,171,000 net acres of prolific oil & natural gas fields as of December 31 ...
Chesapeake's Stock Looks Unattractive At $6
Seeking Alpha - Feb 19, 2017
Seeking Alpha has done a good job of keeping readers abreast to important developments for many companies, and Chesapeake Energy (NYSE:CHK) is no exception. This is a name that has been on my watch list as management has done an excellent job ...
Chesapeake Energy Flat After Inline Report
Benzinga - Feb 23, 2017
Chesapeake Energy Corporation (NYSE: CHK) shares are unchanged at $5.92 in Thursday's session. Before the open, the company announced Q4 earnings coming inline for EPS at $0.07 and just off sales at $2.021 billion vs.
Energy Recap: Your Take On The OPEC Production Cuts
Seeking Alpha - 20 hours ago
Every Friday, Seeking Alpha provides a roundup of insightful opinion and analysis articles in the energy sector. In this edition, we highlight articles on the Permian, Chesapeake, and Inter Pipeline, as well as ask for your take on what's happening in ...
Chesapeake Energy Corporation Provides 2016 Fourth Quarter And Year-End ...
PR Newswire (press release) - Feb 1, 2017
OKLAHOMA CITY, Feb. 1, 2017 /PRNewswire/ -- Chesapeake Energy Corporation (NYSE: CHK) has scheduled to release its 2016 fourth quarter and year-end operational and financial results before market open on Thursday, February 23, 2017.
Chesapeake Energy Lower For Third Session In A Row - Benzinga
Earnings Forecast Research on Chesapeake Energy Corporation (CHK) - Highland Mirror
Do Options Traders Know Something About Chesapeake Energy (CHK) Stock We Don't?
Yahoo Finance - Feb 22, 2017
Investors in Chesapeake Energy Corporation CHK need to pay close attention to the stock based on moves in the options market lately.
Chesapeake Energy: Huge Victory
Seeking Alpha - Feb 2, 2017
Embattled oil and natural gas company Chesapeake Energy Corp. (NYSE:CHK) has announced the reinstatement of convertible preferred stock dividends in January.
Chesapeake Energy Corporation (CHK) Short Interest Update - Sports Perspectives
Chesapeake Energy Corporation's (CHK) “Hold” Rating Reiterated at Credit ... - The Cerbat Gem
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for CHK to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate CHK's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$5.66 Current Price

$8.65 Growth Price (DCF)

Undervalued by 52.90%


Growth Rate Assumed by Market: -22.22%


Future Free Cash Flow Growth Rate: 0.0%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$3.65 Book Price

Overvalued by 35.43%


Very Poor Cash Return on Invested Capital over the past 5 years

CHK has failed to generate positive returns on its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

CHK has lost $10.98 of cash for every $100 invested.
Figures in USD. Fiscal year ends in December
20112012201320142015
Free Cash Flow -3.57B -11.91B -2.99B -1.98B 558.00M
divided by
Invested Capital 34.39B 35.06B 35.43B 30.78B 12.85B
Cash ROIC -10.39% -33.96% -8.45% -6.45% 4.34%

Very Poor Return on Equity over the past 5 years

CHK has shown an inability to deliver results for shareholders. This could be due to poor management, CHK operating in a highly competitive industry, or having a weak business in general.

CHK has generated a $132.02 loss for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in December
20112012201320142015
Net Income 1.74B -594.00M 894.00M 2.06B -14.64B
divided by
Stockholders' Equity 16.62B 15.57B 16.00B 16.90B 2.14B
Return on Equity 10.48% -3.82% 5.59% 12.16% -684.52%

Poor Business Performance over the past 10 years

CHK's inability to produce positive free cash flow for the majority of the past 10 years is concerning. It should be a red flag, since this company does not have a track record of delivering results for shareholders. This could be due to poor management or the nature of its business.

CHK has been losing money for the majority of the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Free Cash Flow -3.88B -4.77B -3.94B -3.17B -8.40B -3.57B -11.91B -2.99B -1.98B 558.00M

Weak Balance Sheet

CHK's financial position is not ideal. The key is to check whether CHK is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Cash 227.52M 1.00M 1.75B 999.00M 1.05B 364.00M 287.00M 837.00M 4.11B 825.00M
Current Assets 1.15B 1.40B 4.29B 2.45B 3.27B 3.18B 2.95B 3.66B 7.47B 2.48B
Total Assets 24.42B 30.73B 38.44B 29.91B 37.18B 41.84B 41.61B 41.78B 40.75B 17.36B
Current Liabilities 1.89B 2.76B 3.62B 2.69B 4.49B 7.08B 6.27B 5.52B 5.86B 3.69B
Total Liabilities 13.17B 18.60B 22.15B 18.47B 21.92B 25.21B 26.04B 25.79B 23.85B 15.22B
Stockholder' Equity 11.25B 12.13B 16.30B 11.44B 15.26B 16.62B 15.57B 16.00B 16.90B 2.14B
Current Ratio 0.61 0.51 1.19 0.91 0.73 0.45 0.47 0.66 1.27 0.67
TL-to-TA 0.54 0.61 0.58 0.62 0.59 0.60 0.63 0.62 0.59 0.88

Low or No Reinvestment of Profits over the past 10 years

CHK has either been retaining a small amount of their earnings or has done so inconsistently. A lack of consistency could be due to CHK operating at a loss or them having such a strong economic moat they feel comfortable spending profits on growth. Be wary of future prospects and if applicable, inspect the moat's sustainability.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Retained Earnings 2.91B 4.15B 4.69B -1.26B 190.00M 1.61B 437.00M 688.00M 1.48B -13.20B
Retained Earnings Growth - 42.43% 13.11% -126.86% 115.07% 746.32% -72.82% 57.44% 115.55% -990.22%

Erratic Net Profit Margins over the past 10 years

CHK has had highly erratic net profit margins which are a great cause for concern. This company may operate in a highly volatile industry, or it may just have poor performance. Look at reasons for this inconsistency to understand if there is any reason to look past it.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Net Income 2.00B 1.45B 723.00M -5.83B 1.77B 1.74B -594.00M 894.00M 2.06B -14.64B
divided by
Revenue 7.33B 7.80B 11.63B 7.70B 9.37B 11.64B 12.32B 17.51B 20.95B 12.76B
Net Profit Margin 27.35% 18.60% 6.22% -75.69% 18.94% 14.97% -4.82% 5.11% 9.81% -114.66%

Varying Pricing Power over the past 10 years

CHK has maintained substantial gross margins, suggesting that they have been able to set prices without consideration of the cost of goods sold. However, there is a substantial variation in their Gross Profit Margins from year-to-year, which indicates inconsistent performance. Look at reasons for this inconsistency to determine the likelihood of future sustainability.

$59.94 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Gross Profit 5.25B 5.10B 7.09B 6.54B 8.11B 11.64B 5.24B 6.15B 7.08B 2.37B
divided by
Revenue 7.33B 7.80B 11.63B 7.70B 9.37B 11.64B 12.32B 17.51B 20.95B 12.76B
Gross Margin 71.62% 65.35% 60.99% 84.87% 86.57% 100.00% 42.51% 35.13% 33.77% 18.57%

High Capital Intensity over the past 10 years

CHK spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

693.19% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Capital Expenditure 8.73B 9.71B 9.18B 7.52B 13.51B 9.48B 14.74B 7.61B 6.62B 676.00M
divided by
Net Income 2.00B 1.45B 723.00M -5.83B 1.77B 1.74B -594.00M 894.00M 2.06B -14.64B
Capital Expenditure Ratio 435.56% 668.85% 1,269.29% -129.06% 761.72% 543.97% -2,481.82% 851.01% 321.89% -4.62%

Very Strong Dividend History over the past 10 years

CHK has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests CHK is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Dividend Paid 175.43M 210.00M 179.00M 204.00M 281.00M 388.00M 616.00M 404.00M 405.00M 374.00M
divided by
Shares Outstanding 458.60M 487.00M 545.00M 612.00M 706.00M 752.00M 643.00M 653.00M 772.00M 662.00M
Dividend Paid Per Share 0.38 0.43 0.33 0.33 0.40 0.52 0.96 0.62 0.52 0.56
Price at Year End 27.47 37.67 15.05 25.70 25.65 22.20 16.56 27.05 19.64 4.40
Dividend Yield 1.39% 1.14% 2.18% 1.30% 1.55% 2.32% 5.79% 2.29% 2.67% 12.84%

History of Stock Buybacks over the past 10 years

CHK has some history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in December
2006200720082009201020112012201320142015
Shares Outstanding 458.60M 487.00M 545.00M 612.00M 706.00M 752.00M 643.00M 653.00M 772.00M 662.00M
Stock Bought Back - -5.83% -10.64% -10.95% -13.31% -6.12% 16.95% -1.53% -15.41% 16.62%
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Discussion
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1
Posted by pbanik  (on July 18, 2012)
@andrewdtx You can look at CHK's peer group here:
http://www.thestreet.com/r/ratings/reports/peergroup/CHK.html

I do agree with your sentiments, but if you look around I'm sure there are better investment opportunities out there.
1
Posted by Dan  (on June 18, 2012)
CHK will IMO start to improve due to some changes in management, looks like the price of NG has no way to go but up.
1
Posted by andrewdtx  (on June 15, 2012)
Aubrey really screwed this up. Anyone have thoughts on the #2 NatGas company and if this stock is going to recover? Is CHKR a better play at this point until something more positive comes for the parent co?