“The underlying strength of our operations, coupled with higher realized prices, resulted in our best financial performance since before the downturn in 2014. For the second consecutive quarter, we recorded significant growth in our earnings and cash flow. ”

-Doug Lawler, Chesapeake’s Chief Executive Officer

(Source: Glassdoor)

Last week, Chesapeake Energy Corporation (NYSE: CHK) jumped from $3.6 at closing on May 14 and closed at $4.54 on May 22, a solid 26.11% gain. Overall, the stock has gained over 50% in the last 3 months whereas the SPDR Energy Select Sector rose only  by around 15% over the same time period. From May 10 to May 17, Chesapeake had its greatest week long increases since March 2016. This boost in stock price appear to be a result of an overall gain in the energy sector due to rising crude oil and natural gas prices as well as strong Q1 reports posted earlier in the month. The large one week rise of CHK can be seen in the chart below:

(Source: Yahoo Finance)

As crude oil and natural gas prices have risen, energy stock performance has also improved. WTI crude oil prices have been strong over the past two weeks above $70 per barrel. Additionally, while natural gas prices have been relatively stagnant compared to oil over the last year, there was a slight upturn this week.  Natural gas prices increased about 3% to $2.82 on May 16 from $2.81 on May 11. These commodities prices volatility played in favor of the entire energy sector, and particularly Chesapeake.

To analyze the gains of Chesapeake Energy this week, it is important to consider the ramifications of the Q1 report released on May 2, 2018. When the Q1 report was released, the stock value declined, which appears to result from the decline of year over year revenue. However, since then the stock has been on the rise as a result of a combination of factors. Chesapeake’s adjusted earnings per share (EPS) were $0.34 for Q1 2018, much higher than analyst’s predictions of $0.27 and Q1 2017’s EPS of $.23. Additionally, Q1 production grew 5% from last year and even adjusted for asset sales still increased by 3%. Moreover, the company’s cash flow was the highest in three years at $609 million which allowed Chesapeake to pay off $581 million of debt. Following this payment, Chesapeake Energy’s debt was reduced to around $9.4 billion from $10 billion at the end of December 2017.  The combination of higher than expected quarterly earnings with the reduction of debt led to improved confidence in the stock.

Analyst Recommendation

According to analysts’ recommendations presented by Yahoo Finance, the majority of analysts gave “Hold” ratings on Chesapeake with 5 of 29 choosing “Underperform” and 3 choosing “Buy.”

(Source: Yahoo Finance)

I Know First’s Success With CHK Stock

On May 15, 2018, the I Know First algorithm forecasted a signal of 17.43 with a predictability of 0.2 for CHK over 7 days period. In accordance with the prediction, the stock rose 26.11% over this time period, highlighting the accuracy of the I Know First algorithm.

Current I Know First subscribers received this bullish CHK forecast on May 15, 2018.

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How to interpret this diagram

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Chesapeake Energy Corporation (NYSE: CHK), incorporated on November 19, 1996, is a producer of natural gas, oil and natural gas liquids (NGL) in the United States. The Company operates in two segments: Exploration and Production, and Marketing, Gathering and Compression. The exploration and production segment is responsible for finding and producing oil, natural gas and NGL. The marketing, gathering and compression segment is responsible for marketing, gathering and compression of oil, natural gas and NGL. As of December 31, 2016, it owned interests in approximately 22,700 oil and natural gas wells. It has a diverse resource base of onshore the United States unconventional natural gas and liquids assets. It has positions in resource plays of the Eagle Ford Shale in South Texas, the Utica Shale in Ohio, the Anadarko Basin in northwestern Oklahoma and the stacked pay in the Powder River Basin in Wyoming. Its natural gas resource plays are the Haynesville/Bossier Shales in northwestern Louisiana and East Texas and the Marcellus Shale in the northern Appalachian Basin in Pennsylvania. It also owns an oil and natural gas marketing business.

Disclaimer

Before making any trading decisions, consult the latest forecast as the algorithm updates predictions daily. You can use the algorithm for intra-day trading. The predictability tends to become stronger with forecasts over longer time-horizons such as the 1-month, 3-month and 1-year forecasts. Algorithmic traders utilize these daily forecasts by the I Know First market prediction system as a tool to enhance portfolio performance, verify their own analysis and act on market opportunities faster. This forecast was sent to current I Know First subscribers.