Chesapeake Energy’s stock price had been floundering at $17 per share for weeks, but shareholders were finally rewarded with a run-up this week after a gold-plated second-quarter earnings report.

The stock reached $20 per share on Aug. 8, 2012, after the natural gas giant reported total revenues rising 2.1% on a year-to-year basis, to $3.3 billion.

Most analysts pegged Chesapeake’s earnings growth much lower. Zacks Investment Research, for example, estimated total revenues of $1.89 billion, a figure that Chesapeake easily surpassed in the second quarter.

Zacks also offers some other takeaways from Chesapeake’s earnings report:

Missed earnings estimate – CHK earnings clocked in at 6 cents per share, missing the Zacks estimate of 8 cents, and was down considerably from the 76-cents-per-share performance in the second quarter of 2011. Analysts say that’s largely because of falling natural gas prices for the last half of 211 and the first quarter of 2012. But natural gas prices are rising again, and Chesapeake is a big beneficiary of those stronger prices.

Production soared (especially natural gas) - The company’s average daily production in the quarter increased nearly 25% on a year-to-year basis, Zacks reported. What’s more, natural gas accounted for 79% of that production growth.

Expenses up - Production expenses increased more than 3% when compared with the same period last year. Chesapeake also ended the quarter with had a cash balance of $1,024 million. Debt balance stood at $14,329 million, representing a debt-to-capitalization ratio of 42.0% (vs. 44.2% in the preceding quarter).

Cash flow decreases - Operating cash flow decreased 25.8% year over year to $895 million.

Selling assets – Chesapeake is in the midst of a major asset selloff of its natural gas options, primarily to make up for a whopping $22 billion revenue shortfall. Up for sale is Chesapeake Midstream Partners (a 46% stake was just sold at $2 billion to Global Infrastructure Partners), Chesapeake Midstream Partners and its stake in the Barnett Shale in Texas.

Overall, Zacks says that Chesapeake’s recent winning streak should continue into the third quarter, noting its profitable move into natural gas liquids. But that growth could be curbed by any negative volatility in natural gas prices, according to the firm’s analysts.

This from Zacks in an Aug. 7 research note about CHK:

“We appreciate Chesapeake’s initiative of deploying more funds toward liquids, like its peers -- Range Resources Corp. and ConocoPhillips. The company has grown rapidly and now ranks the second-largest producer of natural gas. Since 2000, the company has created the largest combined inventories of onshore leasehold of about 15.9 million net acres in the U.S.”

“It also holds a leading position in 10 of the top 15 unconventional liquids-rich plays in the U.S. -- the Granite Wash, Cleveland, Tonkawa and Mississippi Lime plays in the Anadarko Basin and the Texas Panhandle; the Marcellus shale in Pennsylvania and West Virginia; the Haynesville shale in western Louisiana; the Barnett shale in north Texas; the Eagle Ford Shale in South Texas; the Niobrara Shale in the Powder River Basin; and the Utica Shale in Ohio.”

“We think Chesapeake’s focus on shale gas plays should provide the impetus to monetize its assets more effectively. This, coupled with the company’s concentration on liquids, will boost returns. However, since natural gas accounted for about 79% of Chesapeake’s production in the quarter and as near-term speculations of challenging natural gas fundamentals remain, we are apprehensive that the company’s results will be vulnerable to fluctuations in the relevant markets.”

Investors got wind of the positive earnings report, and began snapping up shares of Chesapeake stock this week. In the aftermath of the earnings numbers, CHK’s share price reached 9.4%, and had some nice coattails for other energy stocks to rise accordingly.

Here’s how some other energy firms fared after the CHK numbers hit the street:


Sector Plays                            Stock Price Gains

Energy Select Sector SPDR       +1.5%

Conoco Phillips                          +1.0%

BP                                             +2.5%

Marathon Oil                              +2.6%

Hess Corp.                                 +2.4%

Western Refining                         +2.2%


Zacks isn’t the only Wall Street analyst talking up Chesapeake this week.

Bank of America energy analysts are moving their target share price estimates on CHK to $35 from $31 (Thomson Financial has the consensus target price at $23 per share right now). Says BofA analyst Doug Leggate in a research post this week: “With planned spending down $6 billion in 2013 and asset sales confirming CHK’s move toward harvest mode, we believe CHK is back on track and poised for continued share price recovery.”

In addition, the Wall Street research firm Wunderlich confirmed its’ “buy” position on Chesapeake, and raised its target price from $23 to $24 per share. Consequently, the feeding frenzy on CHK is officially on. CHK was one of the most actively traded stocks on Aug. 8, with 15.68 million shares changing hands.

Any investor contemplating CHK has to know that stock is primarily dependent on natural gas prices, as 53% of its 2011 revenue came from NG operations. But right now, the living is easy in the natural gas market, and if a slew of Wall Street analysts are on the money Chesapeake’s share price still has a nice upward trend in store for investors.