Analyst Questions Whether Chesapeake Energy's Improvement is Enough to Save the Company From Huge Debt

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From Seeking Alpha:
  • While Chesapeake is showing some decent financial results, allowing it to use the proceeds from asset sales to pay down debt, the hole it is in may be too deep. 
  • Its massive exposure to shale gas acreage remains a big impediment given that there are few signs of natural gas prices improving going forward. 
  • By the time natural gas prices will improve, it will be because Chesapeake as well as other shale drillers will run out of prime natural gas drilling sites.
After many years of deep losses incurred on its operations, specifically during the years when oil prices plunged, Chesapeake (CHK) is finally putting in some decent operating results, with the Q1 net operating profit at $268 million, on revenue of $2.5 billion, it is a decent profit margin of almost 11%. This is in part thanks to higher oil prices, but also to a large extent due to drilling consolidation in the more profitable acreage within its asset portfolio, which has been the case for the shale industry overall. The industry also got some significant help from plunging oil services costs, which are now starting to recover. The challenge for the entire shale industry will now be to keep the operating profits (where applicable) even as those service costs increase together with the price of oil. Those who will continue to report financial losses from this point on will most likely eventually disappear. For those who will from now on produce operating profits on the back of the higher oil price environment, the question will remain whether it is going to be enough to make up for the many years of losses incurred over the past decade or so. For Chesapeake the question is in my view more urgent, because the debt hole it is in is particularly deep. 
In order to get a better understanding of how Chesapeake got to be where it is right now, I think it is important to take a step back and look at its yearly operating results going back to the years before the shale boom started, until the present. 
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