Critical Contrast: Chesapeake Granite Wash Trust (CHKR) and PDC Energy (PDCE)

Chesapeake Granite Wash Trust (NYSE: CHKR) and PDC Energy (NASDAQ:PDCE) are both energy companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, profitability, valuation, analyst recommendations, institutional ownership, earnings and risk.

Institutional & Insider Ownership

0.8% of Chesapeake Granite Wash Trust shares are held by institutional investors. 0.9% of PDC Energy shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Chesapeake Granite Wash Trust pays an annual dividend of $0.26 per share and has a dividend yield of 14.1%. PDC Energy does not pay a dividend. Chesapeake Granite Wash Trust pays out 92.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Chesapeake Granite Wash Trust and PDC Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Chesapeake Granite Wash Trust 84.71% 43.81% 43.81%
PDC Energy -29.31% 0.94% 0.54%

Valuation & Earnings

This table compares Chesapeake Granite Wash Trust and PDC Energy’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Chesapeake Granite Wash Trust $12.43 million 6.96 $12.48 million $0.28 6.61
PDC Energy $382.92 million 8.45 -$245.92 million ($4.06) -12.10

Chesapeake Granite Wash Trust has higher earnings, but lower revenue than PDC Energy. PDC Energy is trading at a lower price-to-earnings ratio than Chesapeake Granite Wash Trust, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Chesapeake Granite Wash Trust has a beta of 0.39, meaning that its stock price is 61% less volatile than the S&P 500. Comparatively, PDC Energy has a beta of 0.68, meaning that its stock price is 32% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations for Chesapeake Granite Wash Trust and PDC Energy, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Chesapeake Granite Wash Trust 0 0 0 0 N/A
PDC Energy 0 8 13 0 2.62

PDC Energy has a consensus price target of $66.39, suggesting a potential upside of 35.13%. Given PDC Energy’s higher probable upside, analysts plainly believe PDC Energy is more favorable than Chesapeake Granite Wash Trust.

Summary

Chesapeake Granite Wash Trust beats PDC Energy on 8 of the 15 factors compared between the two stocks.

Chesapeake Granite Wash Trust Company Profile

Chesapeake Granite Wash Trust (the Trust) is a trust formed to own royalty interests for the benefit of Trust unit holders. The royalty interests held by the Trust (Royalty Interests) are derived from Chesapeake Energy Corporation’s (Chesapeake) interests in specified oil and natural gas properties located in the Colony Granite Wash play in Washita County. Chesapeake conveyed the Royalty Interests to the Trust from its interests in approximately 70 existing horizontal wells (Producing Wells) and Chesapeake’s interests in over 120 horizontal development wells (Development Wells) to be drilled on properties within the Area of Mutual Interest (AMI). The AMI lies within Washita County in western Oklahoma and is limited to Colony Granite Wash formation, where Chesapeake holds approximately 40,500 gross acres. Chesapeake has drilled and completed over 90 wells within the AMI. The Colony Granite Wash is located at the eastern end of Des Moines-age granite wash fields.

PDC Energy Company Profile

PDC Energy, Inc. is an independent exploration and production company. The Company produces, develops, acquires and explores for crude oil, natural gas and natural gas liquids (NGLs) with operations in the Wattenberg Field in Colorado and the Utica Shale in southeastern Ohio. The Company operates through two segments: Oil and Gas Exploration and Production, and Gas Marketing. The Company’s Oil and Gas Exploration and Production segment includes all of its crude oil and natural gas properties. The Company’s Gas Marketing segment purchases, aggregates and resells natural gas. The Company’s operations in the Wattenberg Field are focused on the horizontal Niobrara and Codell plays. Its Delaware Basin operations are focused in the Wolfcamp zones and its Ohio operations are focused in the Utica Shale play. As of December 31, 2016, the Company owned an interest in approximately 2,900 productive gross wells.

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