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How Will Chesapeake's Revenue Change If Crude Oil Prices Average $50 Per Barrel In 2018?


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Revenues of Chesapeake Energy, a US-based oil and gas producer, are highly dependent on commodity markets. The sharp fall in commodity prices over the last 20 months has resulted in a notable decline in the company’s price realizations for the various commodities. As a result, the E&P company had to pull back its exploration and drilling plans during 2015. This severely impacted the company, resulting in a drop of almost 50% in its revenue, and close to 75% in its EBITDA last year.

Based on a weak outlook for commodity prices in the near future, we expect crude oil prices to gradually recover to $70 per barrel by 2018 . In this case, Chesapeake’s production and price realization will remain weak in 2016 and grow gradually over the following two years. These numbers are presented in the table below under the base case calculations. If, however, the commodity markets take longer-than-expected to recover and crude oil prices  average $100 per barrel by 2018 , Chesapeake’s revenue in 2018 is likely to be 50% lower than our base case.

CHK-Q&A-scenario2

Have more questions about Chesapeake Energy  ( CHK )? See the links below:

  • What Is Chesapeake Energy’s Fundamental Value Based On 2016 Estimated Numbers?
  • How Will Chesapeake’s Revenue Move If Crude Oil Prices Rebound To $100 Per Barrel By 2018?
  • How Will Chesapeake’s Revenue Move If Crude Oil Prices Average At $50 Per Barrel In 2018?
  • How Much Value Will Chesapeake’s Crude Oil & NGLs Operations Add by 2020?
  • How Much Value Will Chesapeake’s Natural Gas Operations Add by 2020?
  • How Will Chesapeake’s Revenue And EBITDA Grow Over The Next 5 Years?
  • By How Much Has Chesapeake’s Revenue And EBITDA Changed Over The Last 4 Years?
  • How Has Chesapeake’s Revenue And EBITDA Composition Changed Over The Last 4 Years?
  • What Is Chesapeake’s Revenue And EBITDA Breakdown?
  • What Caused Chesapeake’s Stock To Plunge So Drastically?

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email [email protected]

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Chesapeake Energy

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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How Will Chesapeake's Revenue Change If Crude Oil Prices Average $50 Per Barrel In 2018? Reviewed by on . Shutterstock photo Revenues of Chesapeake Energy, a US-based oil and gas producer, are highly dependent on commodity markets. The sharp fall in commodity prices Shutterstock photo Revenues of Chesapeake Energy, a US-based oil and gas producer, are highly dependent on commodity markets. The sharp fall in commodity prices Rating:
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