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Chesapeake Granite Wash Earnings: An Early Look

Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Chesapeake Granite Wash Trust (NYSE: CHKR  ) . The royalty trust focuses on production from the Granite Wash area of Oklahoma and the Texas Panhandle, but shares have plunged over the past year in light of weak gas prices. Let's take an early look at what's been happening with Chesapeake Granite Wash Trust over the past quarter and what we're likely to see in its quarterly report on Friday

Stats on Chesapeake Granite Wash Trust

Analyst EPS Estimate


Change from Previous Quarter's EPS


Revenue Estimate

$35.3 million

Change from Previous Quarter's Revenue


Earnings Beats in Past 3 Quarters


Source: Yahoo Finance.

Will Chesapeake Granite Wash Trust wash up more profits?
Analysts have been pretty complacent with Chesapeake Granite Wash's earnings this quarter, keeping their earnings-per-share estimates stable. But the stock has been troubled, falling 5% since early November even including the impact of a lucrative dividend distribution.

Royalty trusts have become all the rage in the energy industry, as investors seek to focus in on specific plays rather than investing in an entire company's overall success. Chesapeake Energy (NYSE: CHK  ) and SandRidge Energy (UNKNOWN: SD.DL  ) have created several royalty trusts, allowing them to raise capital in a focused way while also giving investors the customized exposure they want. The trusts also pay lucrative distributions, with Chesapeake Granite Wash yielding 14% on a trailing basis.

The problem with royalty trusts, though, is that their income is dependent on prices of the oil and gas they produce. That's been particularly problematic for SandRidge's Mississippian trusts, which focus on the neighboring Mississippian Lime area of southern Kansas and northern Oklahoma. As natural gas prices have remained low, companies have done their best to shift away from dry-gas production toward greater concentrations of liquids. But if a particular region only offers gas, there's little that trust shareholders can do but make the most of it, and weaker resulting distributions were why SandRidge Mississippian Trust II (NYSE: SDR  ) plunged to new lows last week.

For Chesapeake Granite Wash, watch for signs about the mix of oil and gas coming from the play as well as projections of future distributions. With so many investors looking for dividend income anywhere they can get it, it's crucial to make sure you understand exactly how royalty trusts work and what you'll receive at the end of the day.

Are royalty trusts the best way to play Chesapeake?
Chesapeake Energy's shares have traded at a discount for a long time, but with CEO Aubrey McClendon leaving, some investors see new hope for the energy giant. Learn more about Chesapeake and its enormous potential by reading our premium report on the stock, which gives you in-depth knowledge of the company's components as well as a full year of updates. Simply click here now to access your copy today.

Click here to add Chesapeake Granite Wash Trust to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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Related Tickers

9/28/2016 3:59 PM
CHKR $2.04 Up +0.03 +1.49%
Chesapeake Granite… CAPS Rating: **
CHK $6.75 Up +0.52 +8.35%
Chesapeake Energy CAPS Rating: ***
SD.DL $0.00 Down +0.00 +0.00%
SandRidge Energy CAPS Rating: ***