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Aug. 13, 2015, 7:27 PM
- Oil companies are bracing for "lower for longer” prices as a global supply glut persists, dragging U.S. crude to the lowest close since March 2009 at just above $42/bbl.
- More capitulation notes are out; Oppenheimer's Fadel Gheit wrote today that the "new normal" for oil in a recovery would be $65-$75, and that "the vast majority of oil companies are living beyond their means, with operating cash flow falling short of capital investments and dividend... Unless oil prices rebound significantly above future strip prices, oil stocks could sink further, as takeover premiums shrink with potential sellers significantly outnumbering potential buyers."
- The world’s biggest producers will need to trim investments by another $26B, Jefferies believes; capital spending will have to fall 10% next year, according to Banco Santander.
- CNBC's Bob Pisani says when energy stocks staged a brief bounce recently, investors repeated a frequent mistake: They tried to buy oil stocks ahead of a recovery in crude oil, instead of the other way around.
- The result today was heavy losses for many of the sector's big names: CHK -6.6%, MRO -5.4%, COP -2.8%, APC -2.4%, SWN -4.2%, RRC -4.4%, RIG -6.5%, DVN -3.9%, APA -2.6%, BHI -2.9%, CAM -3.5%.
- ETFs: XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, BGR, XES, IYE, IEO, IEZ, FENY, PXE, PXI, FIF, PXJ, NDP, RYE, FXN, DDG
Aug. 11, 2015, 12:48 PM
- Chesapeake Energy's (CHK -5.2%) stock price target is lowered by $2 to $14 at RBC Capital to reflect a wider discount to its net asset value in the current weak oil price environment, with the firm saying "more progress on the liquidity overhang is key to reaching NAV potential."
- RBC sees near-term opportunities for CHK such as outright sales of non-core gassy assets that could generate several hundred million dollars, while larger opportunities to improve the long-term financial structure include sales or JVs of emerging areas such as portions of the STACK and the PRB.
Aug. 8, 2015, 8:25 AM
- Carl Icahn must still foresee plenty of profits to be made in the right energy investments, with his newly announced 8.18% stake in Cheniere Energy (NYSEMKT:LNG) coming after losing billions so far on his holdings in Chesapeake Energy (NYSE:CHK), CVR Energy (NYSE:CVI) and Transocean (NYSE:RIG).
- Cheniere soon will begin to throw off considerable cash flow as it prepares to export the first major amounts of U.S. natural gas by sea later this year from its $16B Sabine Pass terminal on Louisiana’s Gulf coast - but should the company start to return cash to shareholders through dividends, or should it continue to invest and grow?
- Cheniere recently revealed plans to further expand its Corpus Christi terminal and team up with another company on two mid-scale projects in Louisiana, even though it has not secured contracts for the full capacity of projects already announced.
- Heard On The Street's Liam Denning is among those who suggest Icahn may seek to push Cheniere to scale back its ambitions and focus on churning out cash for distribution from its existing contracts; Denning thinks the deal is not a bet on a gas price rally but that any recovery in oil would "turbocharge" Icahn's investment.
- "Cheniere has a very aggressive expansion program and is building out more export capacity than any company in North America," Raymond James analyst Pavel Molchanov says, adding that Icahn may say “You guys have built enough, and now it’s time to give to shareholders instead of building more and more and more."
- While Icahn's plans are unclear, traders bid up the stock anyway after the news, apparently with the expectation that Icahn’s involvement will help push the stock price higher - even though results so far from his energy holdings contradict that notion.
Aug. 5, 2015, 12:24 PM
- An early sigh of relief evaporates as Chesapeake Energy (CHK -9.5%) shares plunge to new 12-year lows following its Q2 report and after CEO Doug Lawler said in this morning's earnings conference call that he does not expect any significant recovery in prices.
- The CEO also said CHK is in discussions with potential investors about cash-raising deals that could involve asset sales or drilling partnerships.
- Lawler said he is not worried about low energy prices deflating offers from potential partners, since any investors considering taking stakes in the company’s fields are focused on how much crude and gas they will yield and at how cheap a per-unit cost.
- CHK also said in the call that it is curtailing 275M cf/day of gas production in the Utica Shale through October.
Aug. 5, 2015, 8:28 AM
- Chesapeake Energy (NYSE:CHK) +1.9% premarket after meeting Wall Street expectations with an $0.11/share Q2 loss on $3B in revenues that came in 41% less than a year ago but slightly better than estimates.
- On a GAAP basis, CHK reported a net loss of $4.15B, or $6.27/share, primarily due to a $3.67B drop in the carrying value due to the low prices for oil and natural gas; the drop was roughly the same size as CHK's Q1 drop in carrying value.
- CHK says its Q2 production averaged 703K boe/day, up 13% Y/Y and up 2% Q/Q, adjusted for asset sales, consisting of 119.5K barrels of oil, 3B cf of natural gas and 79.2K barrels of natural gas liquids, which represent respective Y/Y increases of 11%, 11% and 24%.
- Natural gas accounts for 72% of CHK's production, and the company's average realized price for natural gas for Q2 was $1.01/Mcf, down from $2.45 a year ago and $2.37 in Q1; the average realized price per barrel of oil was $67.91, down ~$17.50/bbl Y/Y but up more than $5 Q/Q.
- Operating cash flow at the end of Q2 was $606M, compared to $1.269B in the prior-year quarter.
- CHK revises its outlook for the rest of 2015, with total production now expected to rise 5%-7% to 667K-677K boe/day, up 4% from the midpoint of prior guidance.
Aug. 5, 2015, 7:04 AM
- Chesapeake Energy (NYSE:CHK): Q2 EPS of -$0.11 in-line.
- Revenue of $3.03B (-41.2% Y/Y) beats by $270M.
Aug. 4, 2015, 6:44 PM
- Chesapeake Energy (NYSE:CHK) ended today's trade at another 52-week low ahead of tomorrow morning's Q2 earnings report, but the market’s extreme reaction to CHK’s recent dividend cut may have provided a buying opportunity.
- WSJ's Spencer Jakab, for one, is backing CHK's move to preserve cash with a potentially positive impact on future output as well as the company’s financial viability, and finds it "frustrating" that the cut was interpreted as a sign that things are worse than believed.
- While the price of natural gas remains weak and could cause further woes for CHK, but Q2 results should show that things the company actually can affect, such as efficiency, continue to improve, Jakab writes.
- CHK "remains far from distress and could sell more assets, but its exaggerated weakness may have brought a larger asset into play: the whole company," Jakab concludes.
- Analyst consensus for Q2 results calls for an $0.11/share loss vs. a $0.38 profit last year on revenue of $2.79B (-45% Y/Y).
Aug. 4, 2015, 5:30 PM
- AMSC, ANSS, ARIA, ARQL, ATHM, ATRO, AVA, AVT, BLT, CEQP, CHK, CLDT, CLH, CMLP, CONE, CRK, CRME, CSTE, CSTM, CTSH, D, DAVE, DISCA, DISH, DNOW, DNR, EE, ENBL, FI, GDP, GTN, HCA, HFC, HSC, ICE, INXN, KATE, KELYA, KERX, LDOS, LG, LINC, LIOX, LL, LPLA, MEMP, MSI, MSO, MWE, PCLN, PWR, RDC, RL, SALE, SBGI, SCMP, SE, SNAK, SODA, SPAR, SPB, SUP, TMHC, TWX, USAC, VC, VLP, VOYA, VSI, WCG, WD, WEN, WIX
Jul. 27, 2015, 2:15 PM
- Chesapeake Energy (CHK +2.2%) is upgraded to Buy from Neutral with a $15 price target at SunTrust, in part because the firm sees the potential for a sale of the struggling company.
- SunTrust looks for CHK's share price to rebound with an additional asset sale, and sees the company potentially duplicating last year’s success by selling some non-core assets in the Powder River Basin or Mid-Continent South, with either possibly generating $500M-plus in proceeds, which could be used to take activity higher than the 9-19 rigs 2015 year-end forecast; the firm adds that it "would not be surprised to see an entire company sale."
- The firm does not see the nearly $7B in liquidity as an issue with a projected outspend of less than $1.5B this year, though CHK’s operating efficiencies appear to be getting buried in the current troubled commodity environment.
Jul. 22, 2015, 3:19 PM
- Chesapeake Energy (CHK -2%) is downgraded to Neutral from Outperform with a $13 price target, cut from $20, at Credit Suisse, which sees a company totally on the defensive and focusing on protecting its balance sheet rather than increasing its production and/or expanding its holdings.
- In an environment where operational efficiency has become critical, analyst Mark Lear considers CHK’s asset base sub-par and providing little cause for investment in such a weak oil and gas price environment.
- While Lear upgrades the energy E&P sector and issues high ratings for several individual stocks, he advises would-be CHK investors to "look elsewhere for investment in this environment and consider operators with core exposure and more flexible balance sheets that are capable of accelerating net asset value even at the strip."
Jul. 21, 2015, 2:18 PM
- A dividend cut often is viewed favorably in the credit markets, but Chesapeake Energy's (CHK -7.3%) dividend suspension (I, II) is having the opposite effect on CHK bonds, which have lost ~$217M in market value so far today, as creditors may be unnerved about a cash balance that was lower than expected at the end of Q2.
- CHK’s $1B of 6.125% notes maturing in February 2021 have plunged nearly six cents to $0.875 on the dollar to yield 9%, Bloomberg reports.
- "The message being sent out is that the next six months are going to be equally as difficult as the last six months," a Gimme Credit analyst says. "Bondholders are saying ‘Whoa, if the company has to cancel the dividend, I guess maybe things are bad.’”
- Goldman Sachs wonders why a company with nearly $3B of cash and a $4B untapped credit line at the end of Q1 would care so much about saving $240M/year at the risk of upsetting equity holders, and suggests CHK may not be able to cut costs as much as expected, or that earnings will miss expectations, or both.
Jul. 21, 2015, 11:28 AM
- Chesapeake Energy (CHK -5.9%) tumbles to new 52-week lows after suspending its quarterly dividend for the first time in 14 years, while most energy names are moving higher in today's trade as crude oil prices rebound.
- "More bold actions like this are needed,” says Oppenheimer's Fadel Gheit, adding that CEO Doug Lawler "has to throw a lot of things overboard to save the ship."
- The move is prudent to improve financial liquidity, RBC analysts say; Tudor Pickering echoes that view, adding that few investors buy CHK for its 3.4% dividend yield.
- "Clearly, management believes that preservation of cash is more important than appeasing a beaten-down shareholder base’s desire for dividend income," says Sterne Agee CRT's Tim Rezvan, who also supports CHK's move; he recently upgraded CHK to Buy with a $13 price target.
Jul. 21, 2015, 7:47 AM
- Chesapeake Energy (NYSE:CHK) says it will eliminate its common stock dividend beginning in Q3 and redirect the cash into its 2016 capital program; CHK will continue to pay dividends on convertible preferred stock.
- CHK also says it has agreed to sell all properties held by its CHK Cleveland Tonkawa subsidiary to FourPoint Energy, and redeems all preferred shares in the subsidiary.
- CHK says the moves are part of a broader disciplined approach to decrease the company's financial complexity and increase liquidity.
- CHK +0.3% premarket.
Jul. 17, 2015, 12:35 PM
- Chesapeake Energy (CHK -4.9%) appears to be in the process of quietly skipping its quarterly dividend, according to Forbes' Antoine Gara.
- CHK normally would have announced its dividend about six weeks ago and set its quarterly payout to shareholders of record, Gara writes, but the company last announced its $0.875 quarterly dividend on March 5.
- In order to produce the cash flow to service its debt and financial commitments to contractors, CHK needs to maintain its oil and gas production, meaning the dividend could be sacrificed, Gara writes.
Jul. 16, 2015, 5:51 PM
- A federal judge today said Chesapeake Energy (NYSE:CHK) must pay an additional $59M to some investors whose bonds it redeemed early, boosting the company's total payout to $438.7M.
- The judge had ruled last week that CHK should pay $379.7M to holders of its $1.3B of 6.775% notes maturing in 2019; the new payment reflects prejudgment interest at the 6.775% rate.
Jul. 13, 2015, 5:38 PM
- Weakness in oil stocks should not be used as a buying opportunity, Barclays analysts say, viewing shares as significantly overvalued and appearing to discount an average oil price of $85-$90/bbl based on group average historical multiples.
- The firm removes Newfield Exploration (NYSE:NFX) and Cabot Oil & Gas (NYSE:COG) from its list of top oil and gas stocks, leaving only Canadian Natural Resource (NYSE:CNQ), EOG Resources (NYSE:EOG), Southwestern Energy (NYSE:SWN), Noble Energy (NYSE:NBL) and Concho Resources (NYSE:CXO).
- Barclays' bottom group consists of five Underweight rated stocks - CHK, OTCQX:COSWF, PXD, OXY and UPL - while WPX Energy (NYSE:WPX) is bumped off the bottom list to reflect an improved outlook as well as a 20%-plus share price decline.
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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