Yet More Progress at Chesapeake

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One of the most compelling aspects of Motley Fool Inside Value recommendation Chesapeake Energy (NYSE: CHK) is that its management is determined to communicate effectively with shareholders. In fact, it's quite easy to gain a ready (and unusual) understanding of Chesapeake's operations and objectives for its annual and quarterly presentations.

Let's start with its most recent results. The company generated adjusted net income for common shareholders (excluding the results of hedging programs) of $330 million. That -- with nearly 12% lower year-over-year gas prices -- amounts to $0.69 per share, and compares with $373 million, or $0.83 a share, in last year's third quarter. But perhaps most importantly, daily production in millions of cubic feet equivalent increased 27% from September 2006.

But since investing is inherently about the future, I'm going to turn to Chesapeake CEO Aubrey McClendon's conference-call comments:

As a result of our production performance, we have increased our growth expectation for future years. We are now anticipating 21% to 23% production growth in 2007 [and] 18% to 22% in 2008, and we have reaffirmed our 2009 production forecast of 12% to 16%. However, please note that will be from a significantly higher base of production.

It's always fun to check in on Chesapeake's progress in the Barnett play of north Texas. "In this play," McClendon said, "Chesapeake's net production increased by an incredible 43% on a sequential basis. That means that during the quarter we added 100 million cubic feet per day of net production."

The quarter was generally mixed for the oil and gas producers. For instance, Anadarko (NYSE: APC), a big independent like Chesapeake, also saw its results decline on lower gas prices. At the same time, Southwestern Energy (NYSE: SWN) and Quicksilver Resources (NYSE: KWK) turned in stronger results on markedly higher production.

For my money, I continue to be impressed by Chesapeake. Prices have moved up far more rapidly for crude producers than for their natural-gas brethren. But I'm betting that, with crude now approaching $100 a barrel, the gap will narrow. Chesapeake, which is bearing down on the top spot among U.S. natural-gas producers and boasts an unusually solid management team, clearly stands to benefit.

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