What Will Chesapeake Energy Do With All That Cash? -- Earnings Preview

Chesapeake Energy Corp. (CHK) is scheduled to announce its third-quarter earnings before markets open on Wednesday morning. Here's what you need to know:

EARNINGS FORECAST: Net income of 35 cents a share is the consensus estimate of analysts surveyed by Thomson Reuters, compared with 24 cents per share at this time last year.

REVENUE FORECAST: Revenue is forecast to hit $4.84 billion, compared to $4.87 billion a year ago.

WHAT TO WATCH:

-- ASSET SALE: How will Chesapeake use the $5.38 billion it is getting from Southwestern Energy Corp. in exchange for leases on 413,000 acres in West Virginia and southwest Pennsylvania? Analysts see the deal, announced in mid-October, as a major move in chronically cash-strapped Chesapeake's efforts to fix its balance sheet. Chief executive Doug Lawler has been trying to rein in the company's free-spending habits, so may use the proceeds to pay down its $11.5 billion in debt.

-- WEAK NATURAL GAS PRICES: Chesapeake and other natural gas producers in Pennsylvania have been getting extremely low prices for their product because there aren't enough pipelines to move the gas to markets. Analysts expect the price the company got for its gas during the third quarter to be even lower than planned. Chesapeake has agreed to sell a big chunk of its acreage in Pennsylvania, but expect questions about the company's drilling plans for the region and its ability to get gas to higher-paying customers.

-- EAGLE FORD: As gas prices have weakened in Pennsylvania, Chesapeake has been giving more attention to pumping oil in the Eagle Ford Shale in south Texas. The company said at the beginning of October that the Eagle Ford was one of three big places it was spending money, and analysts say they expect to hear Chesapeake's leadership talk about growth and improving wells in the area. ([e-mail])

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