Chesapeake Energy Corporation (CHK) shares rose more than 6% on Friday and extended the stock's rally following Wednesday's better-than-expected earnings. The energy giant reported fourth quarter oil, natural gas and natural gas liquids (NGL) revenue that rose 37.3% to $1.73 billion, beating consensus estimates by $660 million, and non-GAAP net income of 21 cents, beating consensus estimates by three cents per share, driven by higher natural gas prices.
The company's production fell 7% year over year to 464,000 barrels per day, and production expenses increased 15% to $2.87 per barrel of oil equivalent (BOE), but full-year adjusted EBITDA per BOE reached $12.81 – the highest level since 2014. Management expects EBITDA per BOE to rise 12% to 15% in 2019, based on recent strip prices, generating meaningfully stronger cash flow. Oil production is expected to rise 32% to 116,000 to 122,000 barrels per day, while capex is projected to remain roughly flat at $2.3 billion to $2.5 billion.
From a technical standpoint, the stock broke out from an ascending triangle pattern during Friday's session. The relative strength index (RSI) reached overbought levels of 70.18, but the moving average convergence divergence (MACD) experienced a bullish crossover. These indicators suggest that the stock could see some near-term consolidation before continuing its intermediate-term trend higher.
Traders should watch for some consolidation above trendline support at around $3.00 over the coming sessions. If the stock breaks out from R1 resistance at $3.20, traders could see a further move toward R2 resistance at $3.45 before consolidation. If the stock breaks below trendline support at $3.00, traders could see a move lower to retest the pivot point at $2.75 or lower trendline support near the 50-day moving average at $2.55, although that scenario appears less likely to occur following the strong Q4 financial results.
The author holds no position in the stock(s) mentioned except through passively managed index funds.