Actually, they have said anything in recent months about paying down debt and they announced no shares purchased. I guess they assume that the shares are not good value or they would have announced that they have acquired a certain number of shares. Ask yourself, why should anyone buy shares if the company does not see the value in the shares. If they see better value somewhere else that is what should be acquired.
Look at it this way, the fourth quarter just reported was terrible and they are now finished with the first two months of the first quarter and it is going to be worse than the last quarter. The share price has tumbled since the last report in just two days, I imagine it will happen again with more of the same after March quarter.
Another two points down after the march quarter and it is time to load up assuming they get rid of that $12 billion debt. The interest on $12 billion in debt is about 3/4 of a billion dollars every 12 months. That hurts after a while.
CHK is producing more oil and gas as last year, so is OPEC, so are most E&Ps despite
putting rigs out of work. This is happening because the drilling being done by everyone
to avoid being cash flow negative and pay down debt is being done on the best locations
which have the highest production. Most experts say the surplus is 1.5 million barrels
per day. Not until that ends will CHK and others see an improvement. As long as
companies are cash flow negative and the surplus production does not reach actual
demand we should all expect that share prices will be under pressure. So, in reality we
do not know how much lower it is going but it is likely to go lower each week as production,
storage and demand are reported and they are out of alignment.
For the past seven weeks, the United States has been producing and importing an average of 1 million more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country's main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy Department reported last week.
If this keeps up, storage tanks could approach their operational limits, known in the industry as "tank tops," by mid-April and send the price of crude — and probably gasoline, too — plummeting.
"The fact of the matter is we are running out of storage capacity in the U.S.," Ed Morse, head of commodities research at Citibank, said at a recent symposium at the Council on Foreign Relations in New York.
Hillary Stevenson, who manages storage, pipeline and refinery monitoring for Genscape, says Cushing could be full by mid-April. Supplies are increasing at "the highest rate we have ever seen at Cushing," she says.
Forget storage in the U.S., people are storing oil on tankers all around the world. Does anyone really think this is not going to impact prices? Prices of energy are going to go lower and unfortunately so will share prices. Expect the quarter that ends in four weeks to be bad for CHK and others
"The Event", yes, yes, but I have been waiting for it for 5 years now and my shares are lower than where I bought in, so we could be waiting for another five years and no real return on this stinker.
I have been waiting and waiting and waiting for the event, we could be dead by then and what good will that do any of us.
If you keep reading the reports on overproduction by everyone: Russia, Saudi's, U.S. and holding our breath for The event, we could suffocate by then.
The Koch Brothers like the price of oil, I am sure Dow Chemical, Dupont and any chemical company and oil based product want the price lower, think plastics, chemicals, think car factories: who sell bigger cars at bigger prices and bigger profits the lower energy prices go. We are not winning this one.
Glad I stepped up at $5.50 and bought.
The yield is really crazy as they predict $80 million excess cash flow for the year after capex and distributions.
I assume prices in 2016 will be higher (around $60 by the beginning of next year and $70 by the end of next year). But all bets are off if the Congress approves the export of oil and that has been introduced by Texas members of Congress today.
I would imagine ETFs and mutual funds are reducing energy sector shares as the federal government and others reported oil production and storage in the U.S. is approaching all time high with 1 million barrels a day that are surplus. Even CHK said in the recent quarterly report that production would increase 3-5% in 2015 over 2014. Frankly the weakness in oil and gas equities should continue for another quarter as the first and second quarter reports by all of them should be terrible.
So how much lower can these equities drop? Only guessing, but 10%-20%.
There is not going to be good news when this quarter ends in 4 weeks. Also, no good news for April, May and June. Can it continue yes, some experts are saying for 1-2 years. So if there is no good news to propel shares higher, shares can trend lower.
ETFs and mutual funds should be reducing energy holdings as the next six months are going to be terrible as U.S. government reported this week that storage of oil has hit all time high in the U.S. and U.S. is producing 1 million barrels a day with no takers. CHK has reported they will be producing 3-5% more in 2015 than 2014. Funds can dump now, buy back in six months at 10% lower prices. Why continue to ride down? Next two quarterly reports for oil and gas producers is going to be terrible.
Oil and gas prices have are down about 50% during the last year. CHK does not want to sell energy at half price so they will come back when prices have gone up substantially. Is that one year or two? No one really knows. Warren Buffet the smartest investor in America sold all of his Exxon Mobil shares, millions of them during the last 90 days. He said it is a good company but this is now not the time to own energy. It could be that way for another year. Now is not the time to buy CHK or any energy producer when we are producing 1 million barrels a day that are surplus production.
The CEO of Exxon said this week that he sees the price of oil in a $50-55 barrel price range for the next two years. This guy is no idiot he is a brilliant oil and gas production executive. As the hedges of BBEP fall each year this could be a problem but I think the price of BBEP has already baked that in. At $1.00 in distributions BBEP should be able to make that for the next two year and by then I believe the Exxon CEO said he sees $70 a barrel oil which should allow BBEP to increase the distribution and pay down debt. If all of that comes to fruition then BBEP should be able to increase the distribution in 2017, pay down debt and we should see the equity price climb to $10 by end of 2015 and $15 by the end of 2016. So, good distribution and good price appreciation. Now if Saudi Arabia and OPEC would cut production 1 million barrels in June then everything accelerates in terms of prices, but I would not hold my breath on that one.
My understanding is that ISIS is moving into Libya to compound the uncertainty in the power
vacuum among the militant groups. What companies are going to keep the infrastructure
running in that country with ISIS cutting off the heads of western workers and Christians?
Exxon has 400 billion a year in revenue perhaps hedging that kind of volume has issues about counter party banks that are willing to take that on or perhaps the cost. What if the hedges are going to cost you 5-10%, maybe you do not spend $20-40 billion every year when you keep that money for 10 years. I'm sure the CEO is looking at current storage in ground and on ships and current production and has his CFO giving him some computer projections on when this surplus is going to decline. The problem is that existing wells and drilling are getting better production as technology gets better every year in drilling and enhanced recovery methods.
Exxon CEO said oil price should be $50-55 for the next two years based upon storage and excess production in the U.S. and OPEC. He said the U.S. is producing 1 million barrels per day that is not needed and the law does not allow it to be exported.
I think this guy has a better handle on the current situation than any of us on this board.
you say if the CEO knew prices and saw the collapse, I never said he could predict weakness in demand and how many wells each company would drill in 2014 and how much overproduction would occur, that is not possible for anyone, but once you see the production numbers, storage numbers after the fact it is not a crystal ball speculation it is about how long it takes to terminate existing contracts for drilling and how long to use up what has been going into storage and is floating around in ships at sea that no one is taking delivery. Your in house economic analysis number crunchers can tell you that. I spent two years early in my career in the economic analysis department of a NYSE energy company (coal, etc.) and that is what we did. You study what is being used each month, how much is in transportation to plants or storage and what is coming out of the ground, etc and you calculate what production you need to meet supply or curtail. The CEO of Exxon has those people telling him how many months of oil are stored around the world, 3 months or 6 months and where that number is heading, such as 7 months or 8 months or 9 months. They calculate the production and storage numbers and they know when it is gone. Unfortunately, you get companies like Chesapeake energy that said production is going to increase with them 3-5% from 2014 to 2015. You need companies to have negative production growth to burn up what is going into storage and the Exxon CEO said in his comments that 1 million barrels a day of current production in the U.S. has to go into storage because of the demand imbalance.
I would say that ETF's and mutual funds have been reducing energy equities and moving to cash as the U.S. produces 1 million barrels a day that has no demand and no export capability as U.S. laws do no permit the export of oil.
Buffet unloaded a monster position in Exxon during the last 90 days even though he said he likes the company. If Buffet and Icahn are not buying energy stocks at the prices found in February and March why should any retail investor. CHK said in the recent conference call that they would produce 3-5% more in 2015 than 2014. They are contributing to the problem. I assume the very rich smart investors are waiting for the lousy first quarter and another fall in oil and gas equity prices before they considering buying more. All investors would probably be smart to exit holdings in energy for the next six months as the good news is not going to be found in the first two quarterly reports of this year.
The drilling companies are obtaining more perfection and more knowledge every month on how to drill in shale rock. The CEO of CHK recently said that they are reducing the time to drill wells from 2014 to 2015 by 2-8 days and this is saving a ton of money. He also said that the half a dozen wells drilled in 2015 in one area is producing 20% more energy than the same wells last year.
This is a technology revolution taking place in the drilling business which is going to benefit U.S. energy companies that can survive the next year or two of overproduction. That is the big elephant in the room. How do you eliminate the excess of one million barrels of energy per day in the U.S. when you are unable to export oil by law and the export of natural gas is two years away in terms of any significant volumes being export.
Long term, reducing drilling costs by 20-25% is going to be very beneficial for CHK and others and we should assume that the tech revolution in oil and gas drilling will continue, the problem is where does this production get sold over the next two year. If not sold it continues to depress prices as it is stored.
They have to write down the value of their oil and gas properties when they issue the first quarter's report. Oil is down from $100 per barrel to $50. Natural Gas is down from $4.50 last January to $2.75 this year. They are going to write off billions and billions of assets, think $2-3-4 billion. Fund managers and ETF managers are being smart and are dumping shares before that negative event happens which will probably wipe out another $1-2-3 in the share value of the company. Remember, the company has a current market capitalization of $10 billion. This write off will hurt the stock big time and you are seeing shareholders dumping this month and it will probably continue for another month.
The volume of CHK reflects that the holders (90% institutions) are lowering their exposure to oil and gas equities. Institutional managers do not want to be over-committed to CHK when they have to take a $2-3-4 billion write-down on their balance sheet due to the 50% decline in oil prices and the 30% decline in natural gas prices over the last year.
When that quarterly announcement is made at the first quarter CHK shares will take another hit, they do not want to be in the shares to hold for a $1-2 decline. They do not want to risk that. If that actually happens and I think it will, then you will see institutional buying after that fal, and what has been happening to CHK this month, (a fall from $20 to $15 a share) will go the other way, but this is going to be another tough month. I would not be surprised to see CHK fall another point in the next 30 days and then another point with the write-off. I may be wrong but I have held my position for many years and the shares are not immune to all negative news. I have made no money in this position for seven years, sad but true.
You hit another nail on the head. Currency. The U.S. dollar has been climbing against every currency in the last six months, 25% against the Euro, 30% against the Canadian dollar, 50% against the Russian ruble. Most currency experts are saying that the dollar could climb another 10% over the next six months especially if unemployment keeps dropping, the expectation of an increase in interest rates in six months becomes more a reality.
Another climb of 10% in the dollar and this equity drops more as the rest of world pays for energy in dollars.