Yesterday, 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).
Yesterday, 5:30 PM
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Mon, Jul. 27, 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.
Wed, Jul. 22, 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."
Tue, Jul. 21, 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.
Tue, Jul. 21, 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.
Tue, Jul. 21, 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.
Fri, Jul. 17, 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.
Thu, Jul. 16, 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.
Mon, Jul. 13, 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.
Mon, Jul. 13, 10:25 AM
- Sterne Agee CRT’s Tim Rezvan reiterates his bullish views on Chesapeake Energy (CHK -3.1%), citing the latest short interest data which shows a 14.1% increase from mid-June to the end of June to 185M shares, 27.8% of shares outstanding and 8.1 days to cover; the increase in short interest increase from the end of February to the end of June was 163%.
- The firm upgraded CHK to Buy from Underperform on June 29, reflecting what it considered as oversold conditions, and Rezvan says the month-end short interest data validates the thesis and expect profit-taking from shorts to provide further support to CHK shares into Q2 earnings.
- The largest increase in short interest came from PetroQuest Energy (PQ +0.1%), which had a 16.1% increase to 7.2M shares (11% of shares outstanding, 5.0 days to cover); Noble Energy (NBL -1.1%) also showed a notable jump, with a 10.3% increase to 17.9M shares (4.6% of shares outstanding, 4.1 days to cover).
- CHK is sharply lower today, apparently in reaction to late Friday's court order for CHK to pay nearly $380M to bondholders.
Fri, Jul. 10, 3:55 PM
- A U.S. federal judge orders Chesapeake Energy (CHK -2.9%) to pay $379.7M to bond investors, ruling the company waited too long to tell them of its plan to redeem their $1.3B of bonds six years early.
- The judge agreed with bond trustee Bank of New York Mellon that holders of CHK's 6.775% notes maturing in 2019 were entitled to a special "make-whole" price because of the early redemption.
- The payout is more than triple the roughly $100M CHK hoped to distribute in "restitutionary" damages.
Thu, Jul. 9, 12:26 PM
- Energy stocks are setting the pace for today's trading, outperforming a positive broader market as crude oil prices bounce back by more than $1 on extended nuclear deal talk deadlines with Iran and China's stock market turnaround.
- Among top gainers so far: CHK +4%, WLL +3%, DNR +3%, NOG +8.1%, CLR +2.9%, SWN +2.5%.
- Oppenheimer's Fadel Gheit is unmoved, believing oil prices "could stay lower and for longer than expected based on the low level of M&A activities as the gap in expectation between potential buyers and sellers remains wide."
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
Tue, Jul. 7, 4:59 PM
- Chesapeake Energy (NYSE:CHK) chalked up its strongest showing in six months, as its shares surged 10% in today's trade to lead all gainers on the S&P 500, even as natural gas fell to its lowest settlement in nearly a month as temperate weather forecasts suggest soft demand on the way.
- Nevertheless, CHK is still down 13% in the past month, 41% YTD and more than 22% in 2014.
- CHK earned some sell-side love last week, as Sterne Agee upgraded shares to Buy from Underperform and Goldman Sachs said CHK has the potential to rise 43% from its current level.
Thu, Jul. 2, 12:29 PM
- Chesapeake Energy’s (CHK +1.3%) decision to sell some assets to privately-held FourPoint Energy for $840M gets a thumbs-up from Wunderlich’s Jason Wangler, who says the deal should help improve the balance sheet while keeping the upside potential on CHK’s core assets.
- The deal likely reduces the balance and payments of its CHK Cleveland Tonkawa, Wangler says, as three tranches of payments come in as the deal is completed, and pricing looks "decent" given the current environment.
- Wunderlich says it likes CHK’s execution and believe so much has been made of the potential pitfalls that many forget the potential catalysts that could drive value, such as accretive acquisitions using the strong liquidity position, potential sales to further improve the balance sheet, and reducing its gathering and takeaway costs.
Wed, Jul. 1, 3:58 PM
- Chesapeake Energy (CHK -5.5%) agrees to sell assets in Oklahoma’s Western Anadarko Basin to privately-held FourPoint Energy for $840M.
- FourPoint will get interest in ~1,500 producing wells in western Oklahoma that produce an average 21.5K boe/day, split between oil, natural gas liquids and natural gas; the assets cover nearly 250K net acres of mineral rights.
- CHK had drilled and completed more than 190 horizontal wells in the acquisition area since 2012, and halted drilling there this Q1 in anticipation of selling the wells, FourPoint says.
CHK vs. ETF Alternatives
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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