Chesapeake Energy (CHKA.Q) got off to a red-hot start in 2019. The oil and gas driller's stock was up more than 50% at one point thanks to an improvement in oil prices. However, it has been all downhill since the company reported somewhat lackluster first-quarter results about three months ago. Overall, shares are now down more than 20% for the year as they've crumbled under the weight of lower oil and gas prices.

Given its struggles, the company has to report strong results when it unveils its second-quarter numbers later this week. If it does, that could give it the fuel to begin rebounding. Here are a few areas where the company needed to outperform.

Oil pumping units with the sun setting in the background

Image source: Getty Images.

Earnings need to beat expectations

One of the factors weighing on Chesapeake Energy after the first quarter was that the company's adjusted earnings of $0.14 per share fell short of analysts' expectations by $0.01 per share. That was in part because its production declined by 12% year over year as a result of recent asset sales. That miss ended a string of positive earnings surprises for the oil and gas driller.

Chesapeake Energy needs to report an upside surprise this week to help shift the momentum back in its direction. To do that, the company had to keep a lid on costs while delivering excellent production numbers from its high-margin Powder River Basin and Brazos Valley units.

Brazos Valley must continue shining

Chesapeake Energy acquired its Brazos Valley operations earlier this year when it closed the acquisition of WildHorse Resource Development. It hit the ground running with that new business unit by eliminating $500,000 in costs per well. Further, the company noted that the early production results from the first few proprietary wells were ahead of its expectations.

The company needed to show even more progress in integrating these operations during the second quarter. Ideally, it will have continued driving down well costs while also delivering production above its forecast.

The Powder River Valley has to keep delivering

The other critical region for Chesapeake Energy this year is the Powder River Basin. The company has been shifting more activity to this area over the past year, which helped drive its output to a record 42,000 barrels of oil equivalent per day (BOE/D) in May.

After finishing 13 wells during the first quarter, Chesapeake Energy expects to complete 15 more during the second quarter. These wells need to deliver excellent results. The company certainly got off to a great start by reporting that a well brought online in early May achieved record-setting production of about 4,000 BOE/D.

If both Brazos Valley and the Powder River Basin continue outperforming, then it will increase the probability that Chesapeake can deliver stronger growth this year. That would put its oil growth rate at more than 32% and its year-end oil mix above 26% of its total output. Further, given that these areas have higher margins, Chesapeake would produce more cash flow this year if its wells outperform expectations. That would help narrow the anticipated gap between Chesapeake Energy's capital spending and cash flow.

Chesapeake needed to outperform in the second quarter

Chesapeake Energy has been under intense pressure in recent months due to continued commodity price volatility. Because of that, a lot is riding on the company's upcoming second-quarter report. Chesapeake energy needs to deliver expectation-beating results to help jolt its stock out of its recent doldrums. If it doesn't, shares could continue their slide.