Wed, Jan. 7, 7:35 PM
- Energy bonds have become one of the riskiest sectors in the bond market, as the cost of buying five-year credit default swaps protecting $10M of bonds has jumped from $139K/year last June to $377K today for companies in the S&P/ISDA CDS U.S. Energy Select 10 Index.
- The index consists of 10 large major energy companies: APC, APA, CHK, COP, DVN, OTCQB:FSTO, HAL, BTU, VLO and WMB.
- Even though most of the companies boast investment-grade ratings, it now costs more to insure bonds in that index against default than it costs to insure bonds of an average junk-rated company, according to S&P.
Tue, Jan. 6, 10:59 AM
- A warm start to winter is disappointing investors who bet U.S. natural gas producers would offer a refuge from falling oil prices, as gas futures settled at a two-year low $2.882/MMBtu yesterday after dropping 32% in 2014.
- Among the 10 worst performers on the S&P’s Exploration & Production Index since June 20 - when oil was $107.26/bbl and gas was $4.53 - seven are companies that produce more than 50% gas; since June 20, Chesapeake Energy (CHK -1.3%) has declined 37%, Range Resources (RRC -0.7%) has dropped 41%, and Southwestern Energy (SWN -1.6%) has plunged 45%.
- The gas market “looks terrible” for 2015 and “has been structurally oversupplied for years," Raymond James analyst Marshall Adkins says as he cuts his forecast for average 2015 Henry Hub gas prices to $3/Mcf from $3.65, citing normal weather that will “unmask the bearish underpinning of the U.S. gas market."
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, DCNG
Mon, Jan. 5, 12:18 PM
- Energy stocks severely underperform the broader market, with the sector -4.2% vs. the S&P 500's -1.4%, as U.S. oil prices briefly slip below $50/bbl for the first time since April 2009; Nymex crude recently was -4.4% at $50.37, while Brent crude -5.9% at $53.08.
- Among the day's biggest losers: DNR -9%, RIG -7.6%, NBR -4.8%, CHK -5.9%, SDRL -9.1%, SD -12.3%, NOV -5.9%, PSX -6.2%, APA -5.9%, DVN -4.4%, EOG -6%, SU -5.2%, OXY -4.2%, APC -8.7%, PWE -9%, ECA -5.5%, MRO -5.3%.
- Global oil majors, which have been seen as less vulnerable to falling oil prices, are posting big losses: XOM -2.7%, COP -4.5%, CVX -3.8%, BP -5.8%, RDS.A -4.6%, TOT -6.5%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, FCG, DIG, PBW, BNO, GASL, DTO, DBO, DUG, IYE, XES, IEO, QCLN, IEZ, UWTI, PXE, USL, PXI, FENY, DWTI, PXJ, DNO, PSCE, RYE, SZO, PUW, FXN, OLO, DDG, HECO, TWTI, OLEM
Dec. 23, 2014, 12:33 PM
- Chesapeake Energy (CHK +7.9%) and Southwestern Energy (SWN -2.2%) are headed in opposite directions today after SWN's $5.4B price tag on its purchase of Marcellus Shale assets from CHK is the most the company has ever paid in an acquisition.
- At ~$13K/acre, CHK's 413K net acres, wells and equipment fetched a price that energy producers typically have been paying for land soaked in oil, not gas, analysts say; SWN "paid literally 2x or 3x times more than any gas deal we’ve seen in the last few years... 20% higher than anyone would have thought,” according to Wunderlich's Jason Wangler.
- In a conference call today, SWN CEO Steve Mueller said the company believes the acreage has more than enough potential to grow to a size that would justify the high price, and investors will see “significant cash flow in just a few years.”
- Sterne Agee's Tim Rezvan says the deal proved recent speculation on CHK's ability to close its previously announced sale to SWN unfounded and opens up CHK's road to investment grade credit.
Dec. 23, 2014, 9:18 AM
Dec. 22, 2014, 4:37 PM
- Chesapeake Energy (NYSE:CHK) +3.2% AH after closing its asset sale to Southwestern Energy (NYSE:SWN) for net proceeds of $4.975B, $400M less than expected due to a settlement for various items, including SWN's waiver of any future claims related to title defects and environmental liabilities.
- The properties sold to SWN consist of ~413K net acres and 1,500 wells located in West Virginia and Pennsylvania with 57K boe/day in net production, along with related property, plant and equipment.
- Also, CHK's board authorizes a $1B stock buyback program.
Dec. 22, 2014, 10:45 AM
- Natural gas prices fall 9.5% to near two-year lows at $3.133/mmBtu, in the biggest one-day percentage loss since February and the lowest intraday price since January 2013, on mild weather forecasts and inventory that is above year-ago levels.
- Prices are now down more than 15% in three straight losing sessions and are 30% lower than the six-month high closing price of $4.489/mmBtu it hit just a month ago.
- Weather has been unseasonably warm for December, limiting demand for home heating and allowing relatively low stockpiles to catch up to where they were a year ago and encouraging traders to sell based on the belief that supply is relatively healthy.
- Gas producers are among the biggest early decliners: XOM -1.1%, CHK -7.3%, APC -2.6%, SWN -6%, DVN -2.2%, COP -2.3%, BP -1.5%, COG -4%, BHP -1.9%, CVX -1.3%, ECA -5.1%, EQT -4.3%, RDS.A -1.7%, UPL -12%, WPX -6.9%, EOG -1%, OXY -1.1%, RRC -6.1%, APA -2.3%, AR -3.2%, CNX -3%, QEP -4.8%, LINE -4.9%, NBL -1.6%, SM -2.6%, XEC -4.2%, PXD -2.9%, NFX -5.1%.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, NAGS, DCNG
Dec. 19, 2014, 10:37 AM
- Even some of Wall Street's big boys are taking a beating in the oil sector: Carl Icahn’s holdings of Talisman Energy (NYSE:TLM) have tumbled $230M since late August, and John Paulson’s firm had one of its largest losses of the year on a bet that big oil companies would buy smaller ones.
- Before TLM agreed to be bought by Repsol, which boosted TLM shares, Icahn's losses stood at more than $540M as recently as Dec. 11, and he still will have lost ~$290M at the deal price; Icahn also holds stakes in hard-hit Chesapeake Energy (NYSE:CHK) and Transocean (NYSE:RIG).
- Paulson was the biggest shareholder in Whiting Petroleum (NYSE:WLL) and Oasis Petroleum (NYSE:OAS) at the end of Q3, but his strategy could yet pay off, as many analysts expect consolidation in the energy sector as lower oil prices pressure smaller firms.
- Also caught flat-footed by the oil price pullback was Prosperity Capital’s Mattias Westman, a longtime investor in Russia whose firm has lost more than $1B this year, in part on stakes in Russian energy companies Gazprom (OTCPK:OGZPY) and Lukoil (OTCPK:LUKOY, OTC:LUKOF).
Dec. 17, 2014, 2:20 PM
- New York Gov. Cuomo's administration says it will ban fracking statewide, citing health concerns and what it considers as limited economic benefits to drilling.
- NY's acting health commissioner said at a cabinet meeting in Albany today that studies on fracking’s effects on water, air and soil are inconsistent, incomplete and raise too many “red flags” for the state to allow it; the state Department of Environmental Conservation will now issue a legally-binding recommendation prohibiting fracking.
- The state has had a de facto moratorium on fracking for more than six years, so nothing really changes with today's decision.
- Parts of New York sit atop the gas-rich Marcellus shale formation, whose top producers include CHK, RRC, RDS.A, RDS.B, TLM, APC, ATLS, COG, CVX, CNX, EQT, EOG, XOM, WPX, XCO, CRZO, SWN, AR.
Dec. 15, 2014, 7:15 AM
Dec. 8, 2014, 7:20 PM
- With valuations at a decade low, oil execs such as Chesapeake Energy’s (NYSE:CHK) Archie Dunham and Ring Energy's (NYSEMKT:REI) Tim Rochford are driving the sector's biggest wave of insider buying since 2012, according to Bloomberg data.
- Rochford and two other board members bought a total of more than 30K REI shares over the past month; the CEO says the company can stay profitable even should oil slip to $50/bbl.
- “Most of these execs that are buying have been in the industry as long as I have, so they know how supply and demand works and they’re buying quality stocks,” says Dunham, who recently bought 500K CHK shares in his biggest purchase since joining the company’s board in 2012.
- Loews Corp. (NYSE:L), which owns about half of Diamond Offshore (NYSE:DO), bought 1.18M DO shares in November and bought another ~410K shares last week.
- Halcon Resources (NYSE:HK) and Goodrich Petroleum (NYSE:GDP) are among companies operating in the costliest U.S. shale-producing regions, but execs from those companies are buyers as well.
Dec. 5, 2014, 5:38 PM
- The Eagle Ford shale formation in south Texas produced its billionth barrel of oil some time last month, according to analysts at research firm Wood Mackenzie.
- Eagle Ford now accounts for 16% of total U.S. oil production, and the firm forecasts E&P spending of $30.8B in the region next year, ~22% of the total $139.3B expected in U.S. onshore spending.
- Eagle Ford is widely considered the most profitable U.S. shale field, and many analysts speculate the break-even price for production to remain profitable is ~$50/bbl in much of the play.
- Top Eagle Ford producers include EOG, CHK, COP, MRO, BHP, APC, APA, BP, COG, CRZO, CWEI, CRK, XOM, GDP, HES, MTDR, MUR, NFX, PVA, PXD, ROSE, RDS.A, RDS.B, SN, SM, STO, SFY, TLM, ZAZA
Nov. 25, 2014, 10:44 AM
- A federal appeals court says Chesapeake Energy (CHK -1.1%) had no right to redeem $1.3B of notes early because it waited too long to tell investors of its plans, reversing a 2013 ruling by a district court.
- The 2-1 decision agrees with Bank of New York Mellon, the notes' trustee, that the notice from CHK to redeem its 6.775% notes maturing in 2019 was untimely, referring the case back to the district court.
Nov. 6, 2014, 2:33 PM
- Chesapeake Energy (CHK -0.3%) discloses that it has received subpoenas from the U.S. Justice Department and states seeking information on its royalty payment practices to mineral owners.
- CHK is facing several lawsuits from landowners and others who say it has underpaid royalties for natural gas and natural gas liquids through the use of improper deductions or below-market pricing.
- CHK, which also is being probed by the DoJ and states over possible antitrust violations related to land purchases, says it is responding to the subpoenas.
Nov. 5, 2014, 7:21 PM
- U.S. companies in shale fields from North Dakota to Texas are talking tough in the face of Saudi Arabia's price war, believing they have more staying power than many of the OPEC partners.
- “Saudi Arabia is really taking a big gamble. If they take the price down to $60-$70, you will see a slowdown in the U.S. but you’re not going to see it stop. The consequences for other OPEC countries are far more dire," says Chesapeake Energy (NYSE:CHK) chairman Archie Dunham.
- Execs at several large U.S. shale producers, including CHK, EOG Resources (NYSE:EOG) and Whiting Petroleum (NYSE:WLL) said as they reported earnings that they plan to maintain and even raise production.
- Shale producers cite success in reducing costs as proof they can still be profitable at prices below $70/bbl; CHK says well costs at its two largest production areas - Pennsylvania’s Marcellus Shale and Texas' Eagle Ford - fell 11% and 13% respectively Y/Y during the first seven months of this year.
- But not all shale is alike: Bakken and Permian producers need prices at ~$67 and $65, respectively, to make drilling worthwhile, according to ITG Investment Research, while producers at the Cana Woodford shale in Oklahoma need $100 to make a profit, and $79 is the threshold at the Anadarko formation on the Texas-Oklahoma border.
Nov. 5, 2014, 3:48 PM
- Chesapeake Energy's (CHK +6.7%) balance sheet is "close to being fully healed," Sterne Agee analyst Tim Rezvan exults after CHK's strong Q3 results, reduced expenses and the $5.4B sale of western Marcellus acreage expected to close this quarter.
- CHK’s focus on expense reduction was evident quantitatively in terms of the lowest all-in unit expense number since Q3 2010, and qualitatively with sharply lower well costs across all core operating areas, according to Rezvan.
- The company's "mantra of operational efficiency is being reflected at the field level, and CEO Doug Lawler's push to drive costs down appears to have more room to run," Rezvan writes.
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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