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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
Nov. 19, 2015, 2:28 PM
- Chesapeake Energy (CHK -8.7%) collapses to new 52-week lows as the company's debt also plunges to record lows in heavy trading.
- CHK is today's most actively traded company in the junk debt market, and nine of its unsecured notes have fallen today - some losing more than $0.12 on the dollar - while credit default swaps have jumped to the highest ever, Bloomberg reports.
- It is not known if investors are capitulating on the credit or shorts are taking advantage of the situation, but at the short end of the curve, the CHK 6.5% notes due 2017 were trading at ~70, yielding 30%, vs. ~80 yesterday to yield 21%, and 96.5 a month ago to yield 8.7%; the once-benchmark 6.625% notes due 2020 have dropped to 45-47 today, yielding ~27.8% at the midpoint, vs. 55 early yesterday to yield 22.6%, and 76 a month ago to yield 13.7%.
- CHK stock has fallen 27% since reporting Q3 earnings on Nov. 4, when it recorded a $5.4B writedown in the value of oil and natural gas fields (I, II).
Nov. 19, 2015, 9:14 AM
Nov. 17, 2015, 11:58 AM
- Chesapeake Energy (CHK -4.5%) plunges near 52-week lows after Sterne Agee CRT downgrades shares to Neutral from Buy and removes its $13 price target.
- The firm says CHK’s fortunes would improve greatly in a $3/Mcf gas world but the macro backdrop has changed and that world is unlikely in the near-term, and Monday night’s news that $394M of convertible bonds were put to the company will refocus attention on the need to address the capital structure.
- CHK's second-lien loan may come soon but may not prove a dramatic equity value creation tool, and a second-lien stigma could overshadow any favorable balance sheet impact, the firm says.
Nov. 16, 2015, 5:37 PM
- SandRidge Energy’s (NYSE:SD) most important assets are at the epicenter of Oklahoma’s earthquake problem, which combined with SD's precarious financial position could cause the company to become insolvent if regulators shut down its disposal wells, according to an AP analysis.
- SD is the only independent, publicly traded driller that does not own a major stake in other oil and gas formations, and its cash crunch prevents it from moving operations to another region, the report says.
- Disposal wells that inject wastewater byproducts into lower rock layers are a key to making the Mississippi Lime play economical, and one in six wells Oklahoma regulators have placed under a microscope belongs to SD, accounting for nearly 85% of the company’s 125 active disposal sites.
- Other drillers including Devon Energy (NYSE:DVN) and Chesapeake Energy (NYSE:CHK) also operate dozens of disposal wells in the area regulators and state geologists are examining, but the other companies have less to fear because each has assets around the U.S., the report says.
Nov. 6, 2015, 5:45 PM
- Chesapeake Energy's (NYSE:CHK) debt rating is cut further below investment grade, to BB- from BB, by Fitch Ratings; shares fell 2.6% in today's trade, in line with other energy producers as crude oil prices fell and amid the higher likelihood of a Fed rate hike.
- Fitch says CHK’s cash flow, liquidity and leverage profiles will be "notably weaker" than previous expectations because of persistently low oil and gas price realizations and heightened future reliance on asset sales to fund cash flow gaps; it also cites CHK’s increasingly limited ability to invest in its highest return assets in favor of operationally committed and shorter-cycle reserves.
- Fitch concedes that CHK’s size and scale relative to other high-yield E&P companies provides considerable financial flexibility.
Nov. 4, 2015, 2:18 PM
- Chesapeake Energy (CHK -6.2%) gave up premarket gains and turned sharply lower almost as soon as regular trading began even as it posted a lighter than expected Q3 loss, and Citigroup analyst Robert Morris thinks the move reflects persistent concerns about CHK's cash burn.
- Morris says CHK ended Q3 with a cash balance of ~$1.76B vs. his $1.95B forecast as the company incurred another drop in working capital ($158M) as it further reduced activity; while production exceeded expectations and costs are being sharply reduced, Morris thinks investor focus remains on "cash burn" and CHK’s ability to execute accretive asset sales to reduce leverage.
- CHK also cut its 2015 capital spending budget for the second time this year, and said it is prepared for a "significantly lower" capital program in 2016.
Nov. 4, 2015, 8:57 AM
- Chesapeake Energy (NYSE:CHK) +5.9% premarket after reporting a smaller than expected Q3 loss, which excludes impairment charges and other special items totaling $5.42B and adds to the ~$10B in impairment charges it already had booked this year.
- CHK's Q3 revenues fell 49.3% Y/Y to $2.89B from $5.7B, and adjusted EBITDA was $560M vs. $1.236B in the year-ago quarter; Q3 drilling and completion expenses fell 41% Q/Q to $467M.
- Q3 production averaged 667K boe/day, up 3% Y/Y after adjusting for asset sales, while its average realized price fell 40% to $15.45/boe.
- CHK says Q3 capital spending fell to $623M from $1.52B in the prior-year period, and cuts its full-year capex target to $3.4B-$3.9B from $3.5B-$4B.
Nov. 4, 2015, 7:03 AM
- Chesapeake Energy (NYSE:CHK): Q3 EPS of -$0.05 beats by $0.08.
- Revenue of $2.89B (-49.3% Y/Y) misses by $130M.
Nov. 3, 2015, 5:30 PM
- AFAM, AGN, AMRN, ARCC, ARCO, ARQL, ARRY, AVA, AVP, AXAS, BDX, BIOS, BSFT, CBB, CDW, CECO, CHK, CLH, CRK, CRL, CRTO, CRZO, CST, CSTE, CTSH, DAVE, DDD, EE, EMES, FOR, FOXA, GDP, HAE, HEP, HMC, HSIC, HSNI, INXN, KELYA, KORS, LINC, LL, MEMP, MFA, MNTA, MSI, MWE, NAVB, NCT, NEWP, NRG, NYLD, REGN, SBGI, SCMP, SE, SHOP, SNH, SODA, SSYS, STNG, TESO, TMHC, TWX, USAK, VG, VOYA, VRTU, VSI, WCG, WD, WEC, WEN, WILN, WIX, WMC
Nov. 3, 2015, 11:45 AM
- Chesapeake Energy (CHK +6.5%) is downgraded to Market Perform from Outperform with a $9 price target, cut from $18, at Bernstein, which says Q3 earnings from several companies indicates that even low cost operators are not profitable at the current price level, and CHK’s high cost structure will make it difficult to generate cash.
- Bernstein sees a risk that in an extended pricing slump, CHK would be forced to sell assets at low- or mid-cycle prices, and believes the market should consider the value of CHK's assets along with its ability to generate near-term cash flow.
Oct. 27, 2015, 11:34 AM
- U.S. natural gas trades below $2/MMBtu for the first time since April 2012 as unusually warm weather for this time of year threatens to slow demand while supplies are high, and some companies hint at a new production boom:
- EQT Corp. (EQT -2.7%) said in an earnings call last Thursday that it had drilled wells in the Utica with very high production rates; “A year ago, it would have been hard to imagine a more prolific play than the Marcellus,” EQT CEO David Porges said. “However, if the deep Utica works, it is likely to be larger than the Marcellus over time.”
- Among major gas producers: CHK -7.8%, SM -5%.
- Earlier: Natural gas -8% as forecasts call for warmer than average weather (Oct. 26)
- ETFs: UNG, XLE, UGAZ, DGAZ, VDE, ERX, OIH, BOIL, GAZ, ERY, FCG, DIG, GASL, DUG, KOLD, BGR, IYE, UNL, FENY, FIF, PXJ, RYE, DCNG, FXN, DDG
Oct. 26, 2015, 2:18 PM
- Natural gas futures are down ~8% as supplies rise toward record levels amid expectations of a warm start to the winter, sending shares of energy companies with heavy exposure to natural gas sharply lower; CHK -8.7%, SM -7.7%, RRC -7.4%.
- Adding to the volatility is the expiration of the November futures contract Wednesday, which recently was trading at $2.06/MMBtu, a level last seen in 2012.
- "This could be a blow off bottom," says Again Capital's John Kilduff, who says the price is hit by expectations that a record amount of natural gas will soon be in storage; weekly data show gas storage at 3.81T cf vs. a record 3.93T cf in November 2012.
- Weather forecasts released last night called for “significant warm trends” across much of the U.S. in the next two weeks, according to MDA Weather Services.
- Crude oil prices also are lower, as lingering concerns over a global supply glut and weakening demand send prices toward their lowest settlement in six weeks.; WTI -1.5% at $43.95/bbl, Brent -0.8% at $47.61.
- ETFs: UNG, USO, OIL, XLE, UGAZ, UCO, DGAZ, UWTI, VDE, ERX, OIH, SCO, BNO, BOIL, GAZ, DBO, DWTI, ERY, FCG, DIG, GASL, DTO, DUG, KOLD, BGR, USL, IYE, UNL, DNO, FENY, FIF, PXJ, OLO, SZO, RYE, DCNG, FXN, OLEM, DDG
Oct. 23, 2015, 12:37 PM
- Southwestern Energy's (SWN -6.6%) $2.8B impairment and Freeport McMoRan's (FCX -0.5%) $3.7B charge are just the beginning, as Barclays estimates at least $20B in charges are coming during Q3 for just six companies, as reported by Bloomberg.
- SWN’s $2.8B writedown was double Barclays’ forecast, which also predicts ceiling-test impairments for Apache (APA -0.1%), Chesapeake Energy (CHK -2.3%), Devon Energy (DVN -0.1%), Encana (ECA -2%) and Newfield Exploration (NFX +0.1%).
- "Many companies will have writedowns as the price of oil is about half of where it once was and gas is also down,” says T. Rowe Price's Timothy Parker, but "it won’t generally hurt the companies because very few have debt covenants that are linked to book value, which the writedowns affect."
Oct. 20, 2015, 4:58 PM
- Chesapeake Energy (NYSE:CHK) is fined $2.1M by the U.S. Department of the Interior for failing to comply with a 2011 order that found "repeated, systematic errors" in the company’s reporting of the amount of natural gas it produced and sold from more than 100 leases on American Indian tribal land.
- In May 2012, CHK said it had submitted all the corrections required by the 2011 order, but the government's follow-up testing found additional underreported volumes; CHK corrected those items in 2013, but further reviews still found uncorrected data.
Oct. 12, 2015, 6:58 PM
- Analysts say examination of the options market indicates shares of Consol Energy (NYSE:CNX), Chesapeake Energy (NYSE:CHK) and Transocean (NYSE:RIG) are each expected to either rise or fall by ~20% in the next six weeks.
- The oil and gas sector as a whole is pricing in more volatility, mostly because of the price of crude oil itself: "If you look at the options market, it's suggested that we could see moves of 2.5% on a single day at least twice a week," says the head of derivative strategy at Susquehanna, adding that a year ago, "the expectation was for that to happen once a month."
- "All this volatility in the oil market just wreaks havoc on these particular companies," says a market strategist at RJO Futures. "We've seen deteriorating net income levels [and] we've seen operating cash start to dwindle a lot."
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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