With the big capex cut, Icahn news you can feel the momentum starting to shift in Chesapeake. Short term this can move up quick once the shorts feel that their wait for Iran is likely either not happening or already priced in.
If you look at the annualized return that the shorts have ALREADY made in the drop from 20 to 14 in a month, the return is INSANE. Annualized return is ridiculous percentages for them. The big short interest clearly saw the opportunity well one month ago.
Possibility of Chapter 11 is very high. For the people shorting this and expecting the drop to continue.
Sentiment: Strong Buy
This is great, exactly the kind of clarification investors are looking from the company. This is heading back to the $20s much sooner that most expect.
Sentiment: Strong Buy
That was the most disappointing part, the downgrade on NG below $2.70 being cited as a factor. Talking about short-term negative cash flow, Conoco Philips (COP) is a 70 Billion dollar producer of oil and gas, and they are experiencing several billion dollars in negative cash flow this year. They will survive and do well once the turbulence resolves itself, but to claim CHK is $9 because of this is madness. The stock has fallen in one month from $21 to $13 now, the MOST in the industry percentage wise by far on all this rehashed talk over and over.
Last few months has shown that the US energy industry probably needs more consolidation, to squeeze efficiencies even more in order to compete with OPEC exporters. If Chesapeake gets an offer in these times it should be worth considering to the alternative of going it alone and having to experience this kind of turbulence more often.
Chesapeake sold about 8% of its holdings for $5 Billion to Southwestern in a fairly tough price environment.
Do the assets minus liabilities under different future pricing scenarios. Taking into account the 4 Billion or so in cash plus this it is hard to make a case today that this company cannot ride this environment out.
We all know how unstable the middle east is in the near term, one minor squabble and you will see what happens to commodity prices again.
Hedging possibly has a lot to do with continued supply. If you are hedged you will probably continue to supply until the hedge runs out.
But how hard is it to see that once these hedges are no longer in place then producers will have no incentive to produce as much and supply will fall possibly substantially? These analysts instead of forecasting price drops need to investigate how much hedging is in place, when these will come off and then use those numbers to better guide the market on what is going on.
I have not seen a single analyst who appears to have done this well. The impact of hedging and how it will wind down is worth a deep article in its own right but this probably requires a lot of hard work and cannot be done with an Excel spreadsheet alone.
I just checked and his co-analyst graduated in 2011 from college. Of course that does not mean he cannot be right, but when making predictions about future commodity prices it helps to have decades of experience.
Hedging has given many some protection, so they may continue to produce if they can sell at hedged (higher) prices.
But cost of hedging must have gone up very significantly now, due to the price volatility. In this environment automatically this means future supply will fall precipitously when there is no hedging to support production. Demand will only grow, so what happens to price when that suddenly happens? The market is forward looking and will take these into account.
Lawler has to convince analysts he is many steps ahead of them, not one step behind. Nobody is surprised at negative cash flow for a short period due to today's price turmoil. They want to know what the company will look like one year from now and what the CEO and board's plan is. Maybe time for a conference call with analysts to directly talk about these?
It's time for Lawler to address Chesapeake's long term plans here once and clearly for all these analysts. It looks like the company is very easy picking to beat down upon, every time someone wants.
Isn't the 4 Billion or more cash in hand, and perhaps more they can generate from asset sales, enough to cover any negative cash flow from operations this year? Why don't they come out and say it so the stock is not such easy picking every time someone wants to downgrade.
Otherwise pick up the phone and listen to calls for assets or the company. Lack of action of this kind is unacceptable.
The analyst's downgrade seems heavily driven by their downside risk to natural gas prices below $2.7
If you can forecast prices so clearly of course you can downgrade any way you want. You can forecast future NG at 25 cents and downgrade tge entire industry.
There is nothing new here gain, analysts will say what they want now. People have been, and will be, hugely incorrect every time they try to forecast futures prices, which is what this downgrade seems driven by.
WLL may receive bids this week. When that happens the market will realize how much Chesapeake's assets are worth in the market. This fall to the teens is tragic for shareholders, I'm sure there are those planning new positions here to take advantage of the merger wave that will hit this industry once the first one rolls.
What you are seeing here is how low Chesapeake is priced now, in a worst case scenario where they have to issue tons to equity to survive. People have been pushing panic buttons for weeks now and watching this go down and down with no real additional news to report. Market is very good at looking forward but sometimes swings too much both ways.
There is great opportunity in energy again, with the right companies. We might see a couple more Icahns sniffing around soon.
LOL. If only it was that funny.
Still cant fathom how Chesapeake drops 40% in a month while the others drop 15-20%. That alone is shocking, and there is nothing company specific different from the others in the sector.
Doug is supposed to be a great CEO and his balance sheet strengthening last year has been extremely timely and beneficial for Chesapeake, he deserves a lot of praise for that.
But in the last month alone, as most producers saw their stock prices drop 15-20% (you can check), CHK has dropped almost 35% (from 21 and change to 13 and change). This is the biggest drop among comparable companies i believe (or one of the biggest). If CHK fell the same as others the stock should be in the 16-17 range today. The CEO/Board needs to figure out why we have been disproportionately hit in this one month.
They have to act (all leaders must), and keep shareholders informed when there is such a big drop.