NEW YORK, NY / ACCESSWIRE / October 31, 2018 / Shares of Chesapeake Energy were plummeting on third quarter results and news that the company will be buying WildHorse Resource Development for $3.977 billion. Shares of General Electric Company were also sinking on dismal third quarter results and traders learning that the company is slashing its dividend to just a penny.
RDI Initiates Coverage on:
Chesapeake Energy Corporation
General Electric Company
Chesapeake Energy Corporation shares closed down 12.10% on about 119 million shares traded on Tuesday. The company revealed that it will be buying WildHorse Resource Development for $3.977 billion in a cash and stock deal. The transaction is expected to close in the first half of 2019. Doug Lawler, Chesapeake's President and Chief Executive Officer, stated, "This transaction accelerates Chesapeake's strategic plan and expands the value-creation opportunities for our shareholders by adding a premier asset at an attractive valuation, significantly boosting oil production, EBITDA margins and cash flow growth, while improving our leverage metrics. The addition of WildHorse, together with our substantial growth profile in the Powder River Basin, advances our transformation into a highly competitive company with a diverse portfolio of high-quality assets, a stronger balance sheet and meaningful oil-growth potential." The deal will result in addition of about 420,000 high margin net acres to the company's oil growth platform and is expected to generate $200 million to $280 million in annual savings. The company also reported third quarter financial results. For the quarter, earnings per share was 19 cents, improving from the 12 cents in the year ago quarter and also topping the estimated 15 cents a share. Revenue rose to $2.4 billion from $1.9 billion in the same quarter a year ago, also ahead of the street’s expectation of $2.3 billion.
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General Electric Company shares closed down 8.78% on Tuesday with almost 345 million shares traded. Average trading volume for the stock is just around 79 million shares. Wall Street didn't react too well to learning that the company is slashing its dividend to one cent a share. The company reported third quarter results that did not hit the mark. For the period ended Sept. 30, GE lost $22.8 million, or $2.63 per share. A year earlier the Boston company earned $1.3 million, or 16 cents per share. Excluding the $22 billion charge tied to its power business and other items, earnings for the quarter were 14 cents a share. Analysts had expected 20 cents a share. Revenue fell 4% to $29.57 billion, which was also lagging expectations. Stephen Tusa an analyst with Morgan Stanley noted after the company's report, "Fundamentally this is worse than expected on profits." Jack Degan, chief investment officer at Harbor Advisory and a GE shareholder said on CNBC's "Squawk Box," that "although I agree with the decision to eliminate the dividend because they certainly need that extra cash for restructuring and dealing with liabilities like a dramatically underfunded pension, this is going to be painful for those individual shareholders who live on their dividend."
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