Mon, Oct. 5, 10:32 AM
- The energy sector is an early leader in today's trading even after Standard & Poor's issued negative outlooks for Exxon Mobil (XOM +0.3%) and Chevron (CVX +1.9%) after Friday's close, citing high debt levels and low energy prices.
- XOM "has substantially more debt than during the last cyclical commodity price trough in 2009, while upstream production and costs are at similar levels,” S&P said, adding that “a sustained period of lower oil and gas prices will significantly reduce the company’s operating cash flow in 2015 and 2016 from 2014 levels, resulting in rising debt balances as the company sustains its capital investments and dividends.”
- The ratings agency anticipates CVX "will outspend internally generated cash flow to fund major project capital spending and dividends."
- While S&P stopped short of credit downgrades - it held CVX’s long-term credit rating at AA and XOM’s at AAA - it did downgrade 12 others: CHK, WLL, UPL, DNR, LINE, BBG, LGCY, TPLM, ARP, CWEI, MPO, EXXI.
- Outlooks also were lowered for NOG and EVEP.
- Ratings were affirmed for COP, WPX, WTI and CRK.
Thu, Oct. 1, 10:58 AM
- Chesapeake Energy (CHK -4.6%) bonds plunge after the company announced an amendment to its existing $4B line of credit that would allow it to incur as much as $2B in junior debt.
- Under terms of the deal, CHK's existing credit line has become a secured credit facility, which can become unsecured again if the company meets certain conditions, which it does not disclose.
- CHK was able to extract some concessions from its lenders, such as the ability to incur new debt and the removal of the total leveraged ratio covenant.
Tue, Sep. 29, 4:35 PM
- Chesapeake Energy (NYSE:CHK) discloses that it is laying off 15% of its total workforce, which would equal ~750 employees, as it attempts to cope with the lower oil price environment.
- In connection with the reduction, CHK estimates it will incur an aggregate of $55.5M in one-time charges during Q3.
- CHK -0.3% AH.
Fri, Sep. 25, 3:15 PM
- Sterne Agee CRT’s Tim Rezvan notes that investors are still shorting oil and gas stocks, especially Chesapeake Energy (CHK -5.6%), and have been rapidly increasing their short positions in Approach Resources (AREX -7.4%), Occidental Petroleum (OXY +0.7%) and Energen (EGN -0.4%).
- According to Rezvan, AREX had a 77% increase in short interest to 7.9M shares (19.6% of shares outstanding) since the end of August, OXY had an 18.9% increase to 17.9M shares (2.3% of shares outstanding), and EGN had an 8.4% increase to 3.7M shares (4.7% of shares outstanding).
- Short interest in CHK rose another 3M shares to 220.6M (33.1% of shares outstanding), the seventh consecutive increase.
Thu, Sep. 24, 6:26 PM
- Citigroup’s team expects a colder-than-normal winter, which it says would be good news for stocks such as Chesapeake Energy (NYSE:CHK), Southwestern Energy (NYSE:SWN), Cabot Oil & Gas (NYSE:COG), Eclipse Resources (NYSE:ECR), Rice Energy (NYSE:RICE) and Range Resources (NYSE:RRC).
- Citi's 2016 composite spot natural gas price forecast of $3.00/MMBtu is based on the assumption of normal weather going forward, but a 4% colder-than-normal winter, all else being equal, would lift its 2016 composite spot forecast to $3.20/MMBtu.
- But Citi says its outlook for much colder temperatures in the Northeast also carries the risk of hurting Appalachian and Utica producers if well freeze-offs and operational disruptions occur, as has often happened in the past during periods of extreme cold or harsh weather.
Fri, Sep. 18, 5:40 PM
Thu, Sep. 17, 3:59 PM
- Chesapeake Energy (CHK -4.4%) is a major loser today following chatter that it may not be able to raise desired capital with a sale of its Utica shale assets.
- Reports say CHK has been hoping for $2B from such a sale but instead has received "low-ball" offers of ~$700M.
- CHK has not announced it is selling these assets, but it has been rumored that the company is shopping for potential buyers.
Wed, Sep. 16, 7:03 PM
- J.P. Morgan analysts warn that companies with large amounts of floating-rate debt - including Chesapeake Energy, Freeport McMoRan, Ford and GE - could be at risk if the Fed decides to raise interest rates.
- Companies with variable/floating-rate debt suffer a more immediate impact by a rate hike than companies with fixed-rate debt, the analysts say; variable-rate coupons typically reset quarterly, meaning that changes in the base rate flow through almost immediately to variable-rate borrowers, while fixed-rate borrowers do not see such an impact until they refinance or issue new debt.
- JPM lists 25 companies - not including financials - that have the “highest variable-rate debt as a percentage of market cap": FMC, NRG, FCX, AES, CVC, LVLT, PVH, CHK, FE, DVA, THC, OI, CNX, F, HCA, FOSL, RCL, JOY, GE, ADS, ALLE, HBI, GT, DNB, AN
Tue, Sep. 8, 3:49 PM
- Williams Cos. (WMB +1.4%) renegotiated contracts with Chesapeake Energy (CHK +5.3%) are supposed to be positive for WMB's EBITDA, but Amey Stone at Barron's says several MLP contracts likely will be rewritten in the coming months resulting in tougher terms for the midstream MLPs that provide the storage and transportation.
- Janney analyst Nathan Judge argues that such negotiations are healthy for the recovery of MLPs, saying the deals often will result in positive outcomes for the MLP and may be supportive for a recovery in the group as fears diminish.
- The MLP usually has the upper hand in contract renegotiations, Judge believes, as customers that wish to renegotiate must make it economically attractive to the MLP to make changes; also, if the customer expects to grow, it will need to incentivize the MLP to invest, which was clear from the WMB-CHK deal.
Tue, Sep. 8, 12:21 PM
- Chesapeake Energy (CHK +6.7%) surges higher after announcing a deal with Williams Cos. (WMB +1.4%) that will decrease its natural gas transportation costs in exchange for higher volume.
- The deal should help improve CHK's 2016 guidance by diminishing the issues of high transportation costs and minimum volume commitments that have weighed on the shares for nearly a year, Wunderlich's Jason Wangler says.
- The firm says it remains bullish on CHK’s assets and believes management "continues to navigate tough internal and external factors quite impressively."
Tue, Sep. 8, 9:14 AM
Tue, Sep. 1, 5:57 PM
- Applying newer fracking techniques to the prolific Haynesville Shale natural gas region that straddles Louisiana and Texas could give the U.S. more and cheaper gas supplies for many years, WSJ reports.
- Experimental wells by explorers including Comstock Resources (NYSE:CRK) and Chesapeake Energy (NYSE:CHK) are proving highly profitable even at today’s depressed prices because of the sheer volume of fossil fuels that can be coaxed out of the ground.
- The results so far have been confined to a small area in a single Louisiana parish near the Texas border, but if the approach works across the entire Haynesville Shale, which spans 120 miles across both states, the era of low U.S. nat gas prices could continue for decades, experts say.
- The costs of fracking wells have fallen in the past year, especially in the Haynesville, the second-largest U.S. gas deposit behind the Marcellus.
- CRK says it could get a 30% return on its new wells even with gas at $2.50/MMBtu, and plans to drill more wells in the Haynesville than it will in the oily Eagle Ford Shale in south Texas.
- ETFs: UNG, UGAZ, DGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, DCNG
Tue, Sep. 1, 10:44 AM
- Investors should stay away from Chesapeake Energy (CHK -0.7%), Citigroup analysts say, even though the stock has shown signs of life recently, up 30% since Aug. 25.
- CHK shares are down 60% YTD, the worst performing stock in the S&P 500, Citi says it is not yet time to buy; while CHK has some good assets and capable management, the firm continues to recommend investors stay on the sidelines until it delivers on its commitment to reduce leverage through several ongoing initiatives.
- Interestingly, in a day of broad declines led by the energy sector, CHK is down only modestly.
Tue, Sep. 1, 9:13 AM
Tue, Aug. 25, 10:43 AM
- Goldman Sachs analysts say the U.S. stock market correction has many more parallels with 1998 than 2008, which “suggest[s] a rebound ahead,” while predicting the S&P 500 will rise by 11% from current levels to reach 2,100 by year's end.
- The S&P fell 19% between July and August 1998, but "ultimately, the U.S. economy was relatively unaffected by overseas financial market gyrations in 1998, and we believe a similar situation will occur in 2015," Goldman says.
- The correlation between U.S. economic growth and Chinese growth is relatively low, Goldman says, estimating that a one percentage point drop in Chinese growth would translate into a 0.06 pp reduction in U.S. GDP.
- The best strategy for U.S. consumers, the bank advises, is to hold companies with high domestic revenues and avoid companies with high foreign sales.
- Goldman's list of the 25 most oversold stocks with high U.S. sales exposure: KMX, M, WFM, CHK, SWN, RRC, COG, PXD, OKE, MPC, NAVI, ETFC, LNC, BXP, KEY, RF, DFS, ANTM, CSX, NSC, UNP, JBHT, FSLR, ADS, PAYX
Thu, Aug. 13, 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
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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