Critical Comparison: Ecopetrol (EC) & Chesapeake Energy (CHK)

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Ecopetrol (NYSE: CHK) and Chesapeake Energy (NYSE:CHK) are both oils/energy companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, profitability, risk, analyst recommendations and dividends.

Earnings & Valuation

This table compares Ecopetrol and Chesapeake Energy’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ecopetrol $18.77 billion 2.44 $10.77 billion $1.09 20.48
Chesapeake Energy $9.50 billion 0.39 $949.00 million $0.82 4.91

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

Insider & Institutional Ownership

2.9% of Ecopetrol shares are held by institutional investors. Comparatively, 57.3% of Chesapeake Energy shares are held by institutional investors. 1.7% of Chesapeake Energy shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Ecopetrol and Chesapeake Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ecopetrol 17.65% 12.58% 5.18%
Chesapeake Energy 6.16% -46.15% 7.54%

Dividends

Ecopetrol pays an annual dividend of $0.61 per share and has a dividend yield of 2.7%. Chesapeake Energy does not pay a dividend. Ecopetrol pays out 56.0% of its earnings in the form of a dividend.

Volatility and Risk

Ecopetrol has a beta of 1.3, suggesting that its share price is 30% more volatile than the S&P 500. Comparatively, Chesapeake Energy has a beta of 1.86, suggesting that its share price is 86% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for Ecopetrol and Chesapeake Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ecopetrol 4 2 0 0 1.33
Chesapeake Energy 7 6 2 0 1.67

Ecopetrol currently has a consensus price target of $12.00, indicating a potential downside of 46.24%. Chesapeake Energy has a consensus price target of $4.48, indicating a potential upside of 11.28%. Given Chesapeake Energy’s stronger consensus rating and higher possible upside, analysts clearly believe Chesapeake Energy is more favorable than Ecopetrol.

About Ecopetrol

Ecopetrol S.A. operates as an integrated oil and gas company. It operates through three segments: Exploration and Production; Refining, Petrochemical, and Biofuels; and Transport and Logistics. The company produces crude oil and gas; and engages in the extraction, collection, treatment, storage and pumping or compression of hydrocarbons. It also transports and distributes hydrocarbons, derivatives, and products. The company has 8,500 kilometers of transportation pipeline systems. In addition, it commercializes crude oils and by-products, including fuel oil, virgin naphtha, cracked naphtha, aviation gasoline, and others; produces and markets polypropylene resin, compounds, and masterbatches; provides financing services; and offers refined and petrochemical products, as well as industrial service sales to customers. The company was formerly known as Empresa Colombiana de Petróleos and changed its name to Ecopetrol S.A. in June 2003. Ecopetrol S.A. was founded in 1948 and is based in Bogotá, Colombia.

About Chesapeake Energy

Chesapeake Energy Corporation engages in the acquisition, exploration, and development of properties for the production of oil, natural gas, and natural gas liquids (NGL) from underground reservoirs in the United States. The company holds interests in natural gas resource plays, including the Haynesville/Bossier Shales in northwestern Louisiana and East Texas; the Marcellus Shale in the northern Appalachian Basin in Pennsylvania. It also holds interests in liquids-rich resource plays, such as the Eagle Ford Shale in South Texas; the Utica Shale in Ohio; the Anadarko Basin in northwestern Oklahoma; and the stacked pay in the Powder River Basin in Wyoming. The company owns interests in approximately 17,300 oil and natural gas wells. As of December 31, 2017, it had estimated proved reserves of 1.116 billion barrels of oil equivalent. The company also provides oil, natural gas, and NGL marketing services comprising commodity price structuring, securing and negotiating gathering, hauling, processing and transportation, contract administration, and nomination services for Chesapeake-operated wells; and marketing services for third-party producers. Chesapeake Energy Corporation was founded in 1989 and is headquartered in Oklahoma City, Oklahoma.

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