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Dec. 23, 2015, 3:19 PM
- Chesapeake Energy (CHK +9.4%) continues to power higher even after S&P’s revision of its corporate credit rating to B from BB-, while noting CHK will face challenging industry conditions which will be intensified by high debt levels.
- Wunderlich analyst Jason Wangler believes CHK is “doing all it can in a tough market... We feel overall the company can make it through and continue to improve its balance sheet to provide liquidity and stability going forward."
- SunTrust’s Neal Dingmann maintains his Buy rating on CHK even as he cuts the target price to $7 from $10; while acknowledging continued potential near-term pressure, he says CHK’s "solid liquidity, financial engineering along with asset heavy portfolio sets up for improved longer term story with each $0.10/Mcf increase in natural gas price potentially adding ~$100M in EBITDA."
Dec. 22, 2015, 5:54 PM
- Chesapeake Energy's (NYSE:CHK) credit rating is downgraded to B from BB- at S&P with a negative outlook, as the ratings agency's business risk assessment for CHK is lowered to fair from satisfactory.
- S&P also cuts CHK's senior unsecured debt rating to CCC+ from BB-, CHK's senior secured debt to BB- from BB+, and CHK's preferred stock to CCC from B-.
- S&P expects natural gas and crude oil prices to remain under pressure from excess production capacity, and sees CHK's profitability suffering from the high costs associated with its gathering and processing agreements.
- While CHK's outstanding debt should fall by ~$1.5B based on preliminary results of the recent exchange offer, S&P says the tendered offer failed to significantly ease the upcoming need to address $2.5B of debt maturities or puts through 2017.
Dec. 22, 2015, 11:46 AM
- Chesapeake Energy (CHK -0.2%) is reiterated with an Underperform rating at Citigroup, which says CHK's levered capital structure is unsustainable given the ongoing low commodity prices it faces.
- Results of CHK's debt exchange showed $2.8B of total par amount was tendered, translating into a $1.7B second lien, and increased the maximum potential size of the new second lien to $3B from $1.5B; Citi believes CHK pushed back the early deadline hoping additional short-maturity paper would tender.
- In CHK's final early tender results, only ~24% of the outstanding 2017 notes were tendered and the total amount of unsecured notes due within the next 4 years tendered increased to 24% from 22%; Citi says a majority of the incremental tenders came from longer-dated paper, which means CHK still has a sizable maturity wall over the next 2-3 years.
- Earlier: Reuters: Chesapeake Energy debt swap offers "fails miserably" (Dec. 18)
Dec. 18, 2015, 3:58 PM
- Chesapeake Energy's (CHK +8%) attempt to ease its short-term liquidity woes looks set to "fail miserably," according to a Reuters report, after CHK had extended Wednesday's deadline for the bond exchange by two days.
- Participation rates from holders of CHK's 2017 and 2018 bonds were just 10%-28%, amounting to just $352M tendered overall on $1.7B in face value, while longer-dated bonds saw ~40% participation.
- "There remains a lot of work for the company to get through this maturity wall and commodity price downdraft," CreditSights analyst Brian Gibbons says on the early tender results.
- Investors have until 5 pm ET today to decide whether to commit at the early deadline for the aggressive offer, which aims to persuade creditors to swap their current bonds for new senior secured second-lien bonds.
- CHK's bonds have tanked since the exchange was announced on Dec. 2; the 5.75% 2023s are trading at just $0.27 on the dollar, while the 6.25% euro-denominated 2017s were quoted at 61% of face value, and the 6.5% 2017s at 57%.
Dec. 14, 2015, 3:43 PM
- Chesapeake Energy (CHK -4.3%) is working with restructuring advisers at Evercore on potential measures to reduce its $11.6B debt load, such as exchanging existing bonds at a discount for new securities or selling assets, Dow Jones reports.
- CHK bonds, considered a junk bond benchmark because of the company's large debt load, are tumbling today, with a 2019 bond down $0.02 to $0.30.
- The tumble in natural gas prices has hurt CHK, which has posted three straight quarterly losses this year.
Dec. 10, 2015, 11:34 AM
- Companies such as Chesapeake Energy (CHK +1.8%) pushed the SEC for an accounting change in 2009 that made it easier to claim reserves from wells that would not be drilled for years, but Bloomberg says the chickens will come home to roost in the next few months when billions of barrels of shale drillers’ reserves are wiped out.
- The rule requires the undrilled wells to be profitable and be drilled within five years, but now the time is up, and the companies must soon report 2015 figures - and prices are down, way down.
- Regulatory filings show CHK's inventory will be cut by 45%, Bill Barrett (BBG +4.1%) will lose as much as 40%, and Oasis Petroleum (OAS +5.8%) will loss 33%.
- "How are these reserves going to come back?” says a Guggenheim Securities analyst. “Because if you have to spend within cash flow, those reserves aren’t coming back. Not unless we get a spike in prices, or we return to levered growth.”
Dec. 9, 2015, 5:27 PM
- Pennsylvania’s attorney general's office says it is suing Chesapeake Energy (NYSE:CHK) over claims the company cheated thousands of landowners who signed drilling leases.
- The lawsuit alleges that CHK tricked landowners into signing one-sided leases in the early years of the Marcellus Shale drilling boom and then improperly deducted certain post-production expenses from landowner royalties.
- CHK says the allegations are baseless and that it will challenge the lawsuit.
Dec. 8, 2015, 12:27 PM
- Wholesale gas for January delivery has nosedived, dropping 6.3% just this week to just above $2/MMBtu, the lowest for any January-delivered futures contract in 17 years and sinking shares of the biggest gas producers.
- The traditional pattern is for U.S. gas use to soar in January, as an exceptionally warm start to the cold weather season has undercut forecast gas consumption thanks to El Niño effects that have caused mild temperatures across big northern cities such as New York and Chicago.
- Meanwhile, gas production from areas such as the Marcellus Shale of Pennsylvania and Utica Shale of Ohio has kept rising in spite of lower prices.
- Chesapeake Energy (CHK +0.4%) has dropped 18% in the past week, Cabot Oil & Gas (COG +3.2%) has lost 9%, and EQT (EQT +0.3%) has slid 7%.
- ETFs: UNG, UGAZ, DGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, DCNG
Dec. 8, 2015, 9:15 AM
Dec. 7, 2015, 10:35 AM
- The energy sector (-4.5%) paces the opening decline, as WTI crude oil prices -4% at $38.35/bbl following a 2.7% slide on Friday after OPEC's failure to agree on a production target to reduce the oil glut.
- Investors are betting on oil prices staying lower for even longer after OPEC's non-decision, pushing U.S. crude futures for delivery nearly 10 years away below $60/bbl, Reuters reports.
- But the oil glut is set to continue as much because of the U.S. as of OPEC, as U.S. shale drillers have only trimmed their pumping a little, and rising oil flows from the Gulf of Mexico are propping up U.S. production; the overall output of U.S. crude fell just 0.2% in September, the most recent monthly federal data available, and is down less than 3%, to 9.3M bbl/day, from the peak in April.
- Goldman Sachs says it expects oil prices to remain "lower for longer," with a risk that prices could fall as low as $20/bbl.
- In early trading: XOM -2.9%, CVX -4.1%, BP -3.2%, RDS.A -4.2%, COP -4.6%, MPC -3.2%, MRO -7.4%, PSX -2.8%, HES -4.9%, APC -6.1%, OXY -3.1%, EOG -5.8%, DVN -9.3%, PXD -7.2%, APA -3.9%, CHK -8%, CLR -9.1%.
- ETFs: USO, OIL, XLE, UCO, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, DBO, DWTI, ERY, FCG, DIG, GASL, DTO, DUG, BGR, USL, XES, IYE, IEO, IEZ, DNO, FENY, PXE, PXI, PXJ, FIF, OLO, SZO, NDP, RYE, FXN, OLEM, DDG
Dec. 4, 2015, 11:48 AM
- Yesterday's selloff in Chesapeake Energy (CHK -4.4%) after the company said it would look to buy back some of its debt is a knee-jerk reaction to a sign of financial distress rather than a cool analysis, Heard On The Street's Spencer Jakab writes.
- Combined with CHK's move in July to eliminate its dividend to conserve cash, the company has enhanced its odds of riding out the energy storm as a going concern, and the most recent move does not cost shareholders a cent, according to Jakab.
- "Shareholders should be feeling buoyant, not despondent," Jakab writes. "By swapping for the nearer-term debt, Chesapeake lowers the chance of it facing a debt crisis and shareholders being wiped out."
Dec. 3, 2015, 2:34 PM
- Chesapeake Energy (CHK -14.3%) sinks to 52-week lows after offering to exchange several of its bonds at a discount for new higher-ranking debt, a move the market is reading as a sign of financial distress.
- The deal is set to add up to $1.5B of new bonds that outrank CHK’s existing notes; holders of bonds bearing 4.875% interest due in 2022 would get as little as $515 in new notes for every $1,000 in principal amount of their old debt, while holders of bonds maturing sooner would take a slimmer discount.
- CHK joins a growing number of energy companies including Linn Energy, Halcon Resources and Exco Resources in using second and third lien notes, which have a higher priority in bankruptcy, to pare down its unsecured debt and extend its maturities into the future.
Nov. 28, 2015, 8:25 AM
- A big find would send an energy company’s stock surging in normal times, but in an environment of excess supply, it is having the opposite effect of pushing down share prices.
- A WSJ report offers a case in point: EQT Corp. (NYSE:EQT) in July drilled what by some measures is the biggest natural gas gusher ever - a well in Pennsylvania's Utica Shale that spewed enough gas in its first 24 hours to power every home in Pittsburgh for nearly three days - but EQT shares have slumped 29% since news of the find.
- EQT believes the Utica, which has been only lightly explored so far since it lies more than three miles underground, has the potential to be so prolific that it could lower natural gas prices and make competing projects uneconomical.
- Shares of Range Resources (NYSE:RRC) and Consol Energy (NYSE:CNX) have tumbled a respective 44% and 54% since those companies disclosed their own prolific Utica wells in December and July.
- Southwestern Energy (NYSE:SWN) and Chesapeake Energy (NYSE:CHK), which have drilling land above the Utica but derive most of their production from other regions, have dropped a respective 53% and 40% since EQT disclosed the first details of its well.
- ETFs: UNG, UGAZ, DGAZ, BOIL, GAZ, KOLD, UNL, DCNG
Nov. 27, 2015, 11:32 AM
- In his first extensive interview since taking over as CEO two years ago, Chesapeake Energy (CHK -3.6%) CEO Doug Lawler tells WSJ he was surprised to learn that 54% of CHK's projects were not profitable in 2012.
- Problems at the time included CHK and former CEO Aubrey McClendon signing contracts to drill hundreds of wells without regard for their economic viability and transporting some natural gas on specific pipelines or facing large penalties, according to Lawler; as a result, CHK spent nearly $30B more on drilling and leasing than it brought in from its operations during 2010-12.
- Lawler says CHK's biggest challenge now resides outside the company: low natural gas prices.
Nov. 20, 2015, 3:54 PM
- U.S. natural gas in storage cracked the 4T cf level for the first time, according to the latest data from the Energy Information Administration, 10% higher than a year ago and nearly as much gas as the U.S. can store - a milestone that "should terrify energy investors," writes Heard On The Street's Spencer Jakab.
- Inventories traditionally peak at the end of the April-October season when heating demand for the fuel is low or nonexistent, but despite subdued new drilling activity, the EIA thinks storage at the end of Q1 2016 will end with a far higher than usual 1.9T cf, which creates a risk of storage filling up even sooner in next year's April-October period.
- Jakab says the situation will add to the woes among beleaguered natural gas producers, some of which are in financial distress - which could grow more acute; in related news, Chesapeake Energy (CHK -5.6%) is down another 5% today, recording new multiyear lows.
- ETFs: UNG, UGAZ, DGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, DCNG
Nov. 19, 2015, 7:20 PM
- Nearly all of Chesapeake Energy’s (NYSE:CHK) bonds plummeted today to their lowest levels ever, as investors who lent $11B are starting to give up on the company, Bloomberg reports.
- CHK's $700M of 5.375% unsecured notes due 2021 fell $0.09 to $0.41 on the dollar, while the price of credit default swaps rose to the highest ever; CHK's stock sank 10% today and hit a 13-year low.
- "We are seeing investors capitulate to the reality of the situation,” says one money manager. “They have a lot of debt, they are burning through cash and their earnings profile is not getting any better. They are trading worse than their credit rating suggests, and there is almost certainly a downgrade coming."
- CHK is making investors worry about its ability to pay back borrowings that are 3x the current worth of its oil and gas fields; the company recorded a $5.4B writedown in value of those fields when it reported earnings earlier this month.
- "There’s an expectation in the market that the company is going to get a second-lien loan,” Sterne Agee analyst Tim Rezvan says. “If that happens, everything that’s subordinate to it comes under pressure.”
- Earlier: Chesapeake Energy bonds plunge to lowest-ever levels
Chesapeake Energy Corp is a natural gas and oil exploration and production company. It explores, develops and acquires properties for the production of natural gas and crude oil from underground reservoirs and also provides marketing & midstream services.
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