Critical Analysis: Chesapeake Granite Wash Trust (CHKR) and Pacific Coast Oil Trust (ROYT)

Chesapeake Granite Wash Trust (NYSE: CHKR) and Pacific Coast Oil Trust (NYSE:ROYT) are both small-cap energy companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, earnings, dividends, risk, institutional ownership, profitability and valuation.

Risk and Volatility

Chesapeake Granite Wash Trust has a beta of 0.51, indicating that its stock price is 49% less volatile than the S&P 500. Comparatively, Pacific Coast Oil Trust has a beta of 2.17, indicating that its stock price is 117% more volatile than the S&P 500.

Profitability

This table compares Chesapeake Granite Wash Trust and Pacific Coast Oil Trust’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%
Pacific Coast Oil Trust 6.02% 1.44% 1.43%

Earnings & Valuation

This table compares Chesapeake Granite Wash Trust and Pacific Coast Oil Trust’s top-line revenue, earnings per share 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
Pacific Coast Oil Trust $32.19 million 2.53 $220,000.00 $0.08 26.38

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

Dividends

Chesapeake Granite Wash Trust pays an annual dividend of $0.26 per share and has a dividend yield of 14.1%. Pacific Coast Oil Trust pays an annual dividend of $0.33 per share and has a dividend yield of 15.6%. 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. Pacific Coast Oil Trust pays out 412.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional & Insider Ownership

0.9% of Chesapeake Granite Wash Trust shares are held by institutional investors. Comparatively, 16.4% of Pacific Coast Oil Trust shares are held by institutional investors. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Chesapeake Granite Wash Trust and Pacific Coast Oil Trust, 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
Pacific Coast Oil Trust 0 1 0 0 2.00

Pacific Coast Oil Trust has a consensus target price of $1.50, indicating a potential downside of 28.91%. Given Pacific Coast Oil Trust’s higher possible upside, analysts plainly believe Pacific Coast Oil Trust is more favorable than Chesapeake Granite Wash Trust.

Summary

Chesapeake Granite Wash Trust beats Pacific Coast Oil Trust on 7 of the 13 factors compared between the two stocks.

About Chesapeake Granite Wash Trust

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.

About Pacific Coast Oil Trust

Pacific Coast Oil Trust is a statutory trust formed by Pacific Coast Energy Company LP (PCEC). The Trust is engaged in acquiring and holding net profits and royalty interests in certain oil and natural gas properties located in California for the benefit of the Trust unitholders. The Underlying Properties consist of producing and non-producing interests in oil units, wells and lands located onshore in California in the Santa Maria Basin, which contains PCEC’s Orcutt properties, and the Los Angeles Basin, which contains PCEC’s West Pico, East Coyote and Sawtelle properties. The Underlying Properties consist of the proved developed reserves referred to as the Developed Properties and all other development potential on the Underlying Properties, which are referred to as the Remaining Properties. Production from the Developed Properties attributable to the Trust is produced from wells that, because they have already been drilled and require limited additional capital expenditures.

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