Chesapeake Energy (OTC:CHKA.Q) will release its quarterly report on Wednesday, and shareholders have high hopes for sharp growth from the energy producer. With the company having shifted its focus to promising areas like the Eagle Ford, Chesapeake has rivals EOG Resources (NYSE:EOG) and ConocoPhillips (NYSE:COP) in its sights, and the stock has built some momentum in climbing back to levels not seen in more than two years.

Chesapeake has been through a lot in recent years, having soared during the energy boom of the mid-2000s only to plunge during the subsequent commodity bust and financial crisis. Natural gas prices have not rebounded since then, and that has forced Chesapeake and its rivals to refocus on more lucrative oil and liquids production. The Eagle Ford has been a big boon to Chesapeake, but Conoco and EOG still have higher production there. Can Chesapeake catch up? Let's take an early look at what's been happening with Chesapeake Energy over the past quarter and what we're likely to see in its report.

Stats on Chesapeake Energy

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$3.49 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

What's next for Chesapeake Energy?
Analysts in recent months have become more enthusiastic about prospects for Chesapeake earnings, raising their third-quarter estimates by $0.03 per share and their full-year 2013 and 2014 projections by about a dime per share. The stock has done even better, climbing 16% since early August.

Chesapeake's second-quarter results helped demonstrate how far the energy company has come from its worst days. Having seen firsthand the dangers of being overexposed to the natural-gas side of the business, Chesapeake has been working hard to establish a more balanced mix of oil and natural gas production. It has also sold off assets in order to improve its financial situation, and cost-cutting measures including a 35% drop in drilling and completion costs and 75% lower capital expenditures have helped enormously. Chesapeake has tried to funnel its limited financial resources into projects with the highest profit potential.

But the real highlight of Chesapeake's performance has come from its rising oil production output. Overall, year-over-year oil production rose 44%, and with 85,000 oil-equivalent barrels of production per day from the Eagle Ford, Chesapeake more than doubled its output from the area and ranks behind only EOG and ConocoPhillips there.

Still, a long-term question faces Chesapeake and its Eagle Ford peers: how long the shale play will be able to sustain its growth. Already, older wells are seeing declines in output that threaten to offset all the growth from newly drilled wells in the Eagle Ford. EOG faces a particularly tough road once the Eagle Ford starts to decline more quickly, while ConocoPhillips has a broadly diversified portfolio that should help cushion the blow. For Chesapeake, the lessons it learns in the Eagle Ford could help it move elsewhere to reap the same rewards.

In the Chesapeake earnings report, watch for two things: the company's breakeven natural gas price and its oil and liquids production growth. As Chesapeake brings costs down, it's once more becoming competitive with the lowest-cost producers in the gas business. Combined with promising oil prospects that are competitive with EOG Resources and ConocoPhillips, Chesapeake Energy could continue to see further growth as long as oil prices remain high and natural gas keeps rebounding.

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