|Bid||0.5605 x 3000|
|Ask||0.5618 x 3200|
|Day's Range||0.5500 - 0.5780|
|52 Week Range||0.5500 - 3.5700|
|Beta (5Y Monthly)||2.38|
|PE Ratio (TTM)||N/A|
|Earnings Date||Feb 25, 2020|
|Forward Dividend & Yield||N/A (N/A)|
|Ex-Dividend Date||Apr 12, 2015|
|1y Target Est||0.99|
Path Trading Partners Co-Founder & Chief Market Strategist Bob Iaccino joins Yahoo Finance’s Zack Guzman, Sibile Marcellus and Independent Women's Forum Board Member and Former Congresswoman Nan Hayworth to discuss how commodities are impacted by the rising U.S-Iran tensions on YFi PM.
Oil prices surged to the highest level since April after U.S. killed Iran’s top commander Soleimani in an airstrike. Stephen Schork, Editor of "The Schork" Report, joins Seana Smith on The Ticker to discuss.
Julian Emanuel, Managing Director & Chief Equity and Derivatives Strategist, joins Yahoo Finance's Seana Smith to discuss the latest energy outlook amid escalating tensions in the Middle East.
Once an iconic industrial giant, few companies have suffered as ignominious a loss as General Electric (NYSE:GE). In fact, the GE stock price peaked in the 2000s era dot-com bubble, never threatening to regain its former glory. But with shares turning in a tremendous performance in 2019, can this beleaguered organization do the impossible and recover?Source: JPstock / Shutterstock.com Obviously, I can appreciate the healthy skepticism that abounds with this name. Not only did GE stock peak roughly 20 years ago, it plummeted following a sizable rally leading up to the 2008 financial crisis. Shares again crashed in 2017 after the company's fiscal situation became untenable.Plus, there's the adage: if shares are cheap, there's usually a reason for it. With GE stock, you're taking a big risk that management can pull off a perhaps unprecedented recovery.InvestorPlace - Stock Market News, Stock Advice & Trading TipsTo be fair, the business leader that has the potential to do this is current CEO Larry Culp. An executive with a long history of accomplishments, he grew the market capitalization of his previous employer Danaher (NYSE:DHR) to $50 billion from $9.7 billion during his 14-year tenure. * 9 Up-and-Coming Small-Cap Stocks to Watch That said, Culp transformed a solid company to a great one in Danaher. But with General Electric, the wall that he must climb is in a different dimension. To draw a comparison, GE stock is the Chesapeake Energy (NYSE:CHK) of the industrial sector in that excellent leadership is not enough: GE requires other factors to shift favorably to see the recovery through.Can it happen? It's not an opportunity for risk-averse investors. However, if you want to take a small, measured gamble, here are three elements to consider: GE Stock May Enjoy a Geopolitical TailwindGeneral Electric's long-term stakeholders are undoubtedly familiar with the saying, "when it rains, it pours." That was evident when Boeing (NYSE:BA) suffered a serious crisis with its 737 Max 8 jetliner. Due to a faulty stabilization mechanism, government agencies throughout the world grounded the plane until Boeing got their act together.As luck would have it, General Electric is the manufacturer of the Max 8's engine. Moreover, the company's aviation division was one of the few bright spots. Without it, the nearly impossible becomes simply the impossible. Naturally, then, investors avoided GE stock like the plague.However, the 737 Max 8 crisis won't last forever. Once Boeing earns back its customers' trust, General Electric can then get back to business.Also, GE's fortune may have finally turned regarding outside tailwinds. Presently, the headlines are not focused on Boeing, but rather, tensions between the U.S. and Iran. With the possibility that the conflict could eventually turn hot, GE's military aviation unit may enjoy a sizable lift. Power Is Still RelevantOne of the conspicuous societal shifts that we've witnessed over the years is environmentalism. Concerns about sustainability have dominated the headlines last year. And one of the forwarded solutions is to promote clean energy initiatives.Last month, the Los Angeles Department of Water and Power announced their intention to convert one of their power plants to 100% hydrogen by 2045. To do this, the utility firm will integrate a variety of renewable energy platforms to produce hydrogen via electrolysis. Currently, technological barriers prevent meeting the 100% hydrogen goal earlier.But according to Harvard researchers Lee M. Miller and David Keith, that might not come to fruition. Based on their analysis, the U.S. is grossly underestimating the land requirements for going fully green. As an example, if the entire country were to be powered via renewable energy sources, "it could require one-third of the country be covered by renewable solar and wind energy facilities."In other words, General Electric's power unit is still relevant. It's just taking some time for influential people and organizations to realize this. Technicals Are CompellingWe all know that GE stock is cheap. And as I mentioned above, such discounts exist for typically unpleasant reasons.However, the opposite angle is that shares have jumped substantially from its late 2018 lows. While hiccups have presented themselves along the way, the equity has marched steadily higher. Thus, there's a reason for that too.At time of writing, GE stock is trading just under $12. That places shares at the support line just prior to its October 2018 crash. To put it another way, GE is at a crossroads.For conservative investors, it's safer to assume that shares have again hit a peak. Culp can work wonders but General Electric requires a miracle. But for speculators, there might be enough momentum (at least in the nearer term) to spark a significant lift.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 9 Up-and-Coming Small-Cap Stocks to Watch * 7 Energy Stocks to Buy on the Resurgence of the Oil Boom * 3 Standout Oil Services Stocks to Buy The post 3 Factors to Consider Before Gambling on GE Stock appeared first on InvestorPlace.
Can floundering Chesapeake Energy (NYSE:CHK) catch a break in 2020? CHK stock is worth less than a third of what it was this time last year.Source: Casimiro PT / Shutterstock.com Natural gas, Chesapeake's bread-and-butter, remains in a slump. The Iran incident briefly pushed oil up above $60/barrel, but prices fell back after tensions cooled down. With the company dependent on factors outside its control (energy prices), it's tough to see how they can get themselves back on track.The company's high leverage also doesn't help. A recent debt exchange may keep the company out of bankruptcy in the coming year, but in the long-term, the company's work is cut for them with regard to de-leveraging. Based on quotes from the Finra/Morningstar Bond Screener, much of the company's publicly-traded debt trades far below par value.InvestorPlace - Stock Market News, Stock Advice & Trading TipsAs a recent analysis from InvestorPlace's Ian Bezek discussed, it's telling that bondholders took 30%+ losses in the refinancing. And if the bonds aren't worth their par value, that doesn't bode well for Chesapeake's equity. * 10 Cheap Stocks to Buy Under $10 In other words, even though shares trade around $0.70/share (down 80% from their 52-week high), they could go to zero. On the other hand, investors willing to risk a complete loss could see significant upside if energy prices rebound in the coming year.Increased energy prices would improve the valuation of the company's underlying assets. With asset sales, Chesapeake could pay down much of its debt, get out of the hole, and become a more stable enterprise. With natural gas prices depressed, Chesapeake's highly-leveraged balance sheet, and asset impairment charges hitting the energy space, the stock's near-term prospects do not look promising. Handicapping Natural GasChesapeake is not only overleveraged debt-wise. The company's future prospects are all-too-dependent on natural gas prices. Even with cuts, the company's production split remains heavily weighed towards natural gas.There currently is oversupply in the natural gas market. This isn't helped by the abundance of associated gas, that is, natural gas found with crude oil deposits. But some oil producers are opting to burning off the unprofitable natural gas, in lieu of selling it. However, this alone may not make up for the glut.Much of Chesapeake's production this year is hedged at higher prices ($2.75/MMBtu). This covers the company for 2020, but 2021 is another matter. Based on forecasts by the Energy Information Administration (EIA), estimates call for natural gas prices to be about $2.54/MMBtu. This is a rebound from their 2020 average price estimates ($2.33/MMBtu), but still far from prices seen in prior years.Natural gas prices are the main catalyst to make or break Chesapeake. This plays into another factor with the company, which is the value of its underlying reserves. The company needs the market value of these assets to sustain in order to execute much-needed asset sales. Asset Sales and CHK StockChesapeake Energy is very dependent on factors outside its control. Yet, there are ways for the company's management to work through these headwinds, helping reverse the stock's downward trend.Asset sales remain a big option for Chesapeake. The company was in talks to sell $1 billion in assets to Comstock Resources (NYSE:CRK). However, December's refinancing deal has delayed talks on this proposed transaction.Even if Chesapeake can find buyers for some of its assets, what types of prices do they expect to fetch? Chevron's (NYSE:CVX) recent impairment charges were discussed in InvestorPlace contributor Mark Hake's January 3 CHK stock analysis. However, Chevron is not the only big energy player writing-down oil and gas assets. Royal Dutch Shell (NYSE:RDS.A RDS.B) has also announced a big impairment charge.Chesapeake's oil and gas reserves are on the books at $14.9 billion. But with an estimated $8.76 billion in debt (post-debt exchange), and a current market cap of $1.32 billion, investors are implying these reserves are worth just around $10 billion. Unless the natural gas situation improves, the company's margin for error is becoming thinner and thinner. If natural gas assets see further valuation impairments, Chesapeake's assets may be worth less than its outstanding debt. In other words, CHK stock would truly have zero underlying value. The Bottom Line on CHK StockIt's impossible to tell when or even if Chesapeake Energy will rebound. So much of the bull case hinges on "predicting the unpredictable." How good are you at handicapping the natural gas markets? Unless you can develop a high-conviction case for higher gas prices in 2020 and 2021, I wouldn't try to tackle this hot mess of a company.You could speculate, and see big gains if a black swan event pushes natural gas prices back up to prior levels. But if you prefer to invest, and not gamble, Chesapeake is not your play. Look elsewhere for opportunity.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Cheap Stocks to Buy Under $10 * 5 Retail Stocks Placer.ai Thinks Can Win Big in 2020 * 6 Cheap Stocks to Buy Under $7 The post Low Natural Gas Prices and High Debt Still Weigh Down CHK Stock appeared first on InvestorPlace.
Chesapeake Energy Corporation (NYSE:CHK) today announced that its Board of Directors has declared dividends on its outstanding convertible preferred stock issues, as stated below.
Shares of Chesapeake Energy Corp. sank 5.2% in active afternoon trading Monday, putting them on track for a 4th-straight loss, as crude oil futures continued to sell off amid the perception of reduced tensions in the Middle East. Chesapeake's stock, which was the second-most active on NYSE with 36.8 million shares traded, has tumbled 23% during its losing streak, and is headed for the lowest close since Dec. 3. Continuous crude oil futures shed 1.1%, and have dropped 7.7% amid a 5-day losing streak. Chesapeake's stock has lost 50.2% over the past three months, while the SPDR Energy Select Sector ETF has gained 3.0% and the S&P 500 has climbed 10.5%.
Now we’re heading into the Energy sector reporting season with oil prices in a state of flux—having touched their highest levels since April of last year and then fallen back below $60—all within the same 24-hour period. This after what looked like an escalation of tensions between the U.S. and Iran—airstrikes against U.S. military facilities—followed by what appears to be cooler heads prevailing. Regardless of how crude oil prices react in the near term, it’s too late for them to impact the upcoming quarterly earnings reports—and what’s likely to be another set of disappointing numbers.
Thanks to their inherent volatility, speculative oil companies almost always produce interesting headlines, to say the least. But within this sector, nothing has generated as much attention recently as Chesapeake Energy (NYSE:CHK). A deeply troubled name following the last energy market crisis, the CHK stock price tumbled below $1 last November.Source: Casimiro PT / Shutterstock.com As any reasonable person would suggest, I urged extreme caution on Chesapeake Energy stock. Using a football analogy, I likened shares to a fourth-and-forever situation. Not only that, time was the enemy, with the game on the line and the team down on points. But thanks to a complicated debt-financing deal, the situation transitioned to fourth-and-long.Granted, that is an improvement. More importantly, the energy firm bought itself some time. However, it's not a ringing endorsement of Chesapeake Energy stock by a long shot.InvestorPlace - Stock Market News, Stock Advice & Trading TipsNevertheless, following my article's publication date, shares bounced higher (because of course it did). Apparently, several investors thought the pros outweighed the cons. That said, rational thinking reentered the space and the CHK stock price came back down to earth. * 8 of the Strangest Stocks Worth Your Time In fact, at time of writing, we're back at square one relative to my last CHK story. Naturally, this raises the question: will Chesapeake Energy stock rise higher once more on speculative interest or was the previous rally a dead-cat bounce?Fundamentally, I don't see anything about the company that has changed: management is doing what it can to tread water. However, in my previous write-up, I did mention that other factors must come into play to make CHK stock credible. And the recent conflict between the U.S. and Iran may provide the platform for the extreme bullish gamble. Middle Eastern Conflict a Possible Catalyst for CHK StockAs you're well aware, U.S. military forces killed Iranian general Qassem Soleimani. According to President Donald Trump, Soleimani was planning to attack the U.S. embassy in Iraq. If so, it was a justified preemptive attack. Unsurprisingly, Iran wasn't happy about losing their top military officer.In response, Iran launched missiles at an Iraqi base housing American service members. Optically, it looked like an act of war, with many fearing the worst. But in the aftermath, Trump revealed that neither U.S. nor Iraqi forces suffered casualties. Because of remarkably muted response, the president decided against a military response.So, all is well, using the commander in chief's words. However, I believe the markets are badly underestimating Iran's anger and resolve. Should they strike back with a more painful response, oil prices will surely rise. Iran is one of the world's top oil producers. Furthermore, experts estimate that their oil reserves may last 90 years or longer.Cynically, taking this nation out of the equation will benefit the CHK stock price.But just how likely is it that Iran will seek a deadly response? Based on rapidly devolving events, I'd say quite likely.Shortly after Iranian forces launched their missiles, a Ukrainian airliner carrying many Canadian passengers crashed. Initially, conspiracy websites declared that a missile took down the plane. But later, Canadian Prime Minister Justin Trudeau confirmed the shocking accusation.Two major points stand out. First, Iran immediately lost sympathy from the international community. Second, this matter will pressure already frayed relations between the U.S. and Canada. And going back to Iran, the country looks incredibly incompetent.Having lost so much face and with Trump imposing new economic sanctions, Iran has its back against the wall. I'd be surprised if they didn't respond. That's the cynical tailwind for CHK stock. Still a Toxic InvestmentNow, before you go diving into Chesapeake Energy stock, a word of caution: this "investment" still stinks.Irrespective of what happens in the Middle East, the core nature of the company remains the same. Presently, it has an unsustainable debt level. While it bought itself some time, it's got to do something with it. Both history and the forward outlook doesn't augur well.That said, the Iranian situation is a contrarian catalyst because a) it's important and b) not too many people seem to respect it. Should Iran's supply be compromised or if Iran compromises other nations' oil supplies, the oil bull market could reemerge vigorously.But can CHK stock stay afloat long enough to advantage this possible development? I can see why some gamblers are intrigued. But with so many variables, anyone that doesn't have "stupid money" to play with should avoid Chesapeake Energy.As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 8 of the Strangest Stocks Worth Your Time * 7 Stocks to Buy That Trump's Tax Cut Truly Rewarded * 5 Stocks That Could Double in 2020 The post Can Iran Save Chesapeake Energy Stock? appeared first on InvestorPlace.
Moody's Investors Service (Moody's) affirmed Chesapeake Energy Corporation's (Chesapeake) Probability of Default Rating (PDR) at Caa1-PD and appended the rating with a "/LD" designation. Additionally, Moody's upgraded the company's Speculative Grade Liquidity (SGL) Rating to SGL-3 from SGL-4. At the same time, Moody's withdrew Brazos Valley Longhorn, L.L.C.'s (Brazos Valley) Caa1 Corporate Family Rating (CFR) and the Caa2 senior unsecured notes rating of Brazos Valley's predecessor entity, WildHorse Resource Development Corporation (WildHorse).
Chesapeake Energy Corporation (NYSE: CHK) ("Chesapeake" or the "Company") today announced the expiration and final results of its tender offer, on behalf of Brazos Valley Longhorn, L.L.C. ("BVL") and Brazos Valley Longhorn Finance Corp. (together with BVL, the "Issuers"), each wholly owned subsidiaries of Chesapeake (the "Tender Offer"), to purchase for cash any and all of the outstanding 6.875% Senior Notes due 2025 (the "Notes") issued by the Issuers and its simultaneous solicitation of consents (the "Consent Solicitation") with respect to certain proposed amendments to the indenture governing the Notes. As of 11:59 p.m., New York City time, on January 6, 2020 (the "Expiration Date"), approximately $616.2 million aggregate principal amount, or approximately 99.74%, of the Notes were validly tendered and related consents validly delivered.
Even as uncertainties flare over when at how Iran will retaliate after a U.S. airstrike took out one of its top Iranian military commanders, markets have taken hold of two grounding principles, according to Mohamed El-Erian.
Oil prices spiked in the immediate aftermath of the Department of Defense’s confirmation of an airstrike that killed a top Iranian military commander.
Oil prices gained $3 overnight, but there is a lineup of stocks benefitting from the fear premium following the assassination of Qasem Soleimani,
MARKET EXTRA Oil stocks were in the spotlight on Friday after a targeted military strike killed Iranian General Qassem Soleimani, considered the architect of the Islamic Republic’s military expansion in the Middle East.
There are two ways to look at Monday's third-quarter earnings report that sent the Nio (NYSE:NIO) stock price soaring. The first is to see the report as a potential game-changer for NIO. Its unit sales grew nicely relative to the second quarter, its margins improved, and its fourth-quarter guidance was impressive.Source: Carrie Fereday / Shutterstock.com The second is to see the report and the 54% gain of Nio stock price on Monday as much ado about nothing. The news was certainly better than expected,. But that's only because the expectations for the results were so low. Little, if anything, about the Q3 earnings were actually positive from a long-term standpoint.I'm firmly in the latter camp. I've been bearish on Nio stock for some time, and I argued this spring that there was a real chance of Nio stock price hitting zero. The Q3 numbers and commentary haven't changed my opinion much, if at all, about NIO. The company still has a very real chance of running out of cash. Expectations aside, the Q3 numbers are enormously concerning. The gains of Nio stock price this week look like a near-term short squeeze, rather than a reaction to a change in the long-term outlook of NIO and its shares.InvestorPlace - Stock Market News, Stock Advice & Trading Tips The Good NewsNio's Q3 results suggest that it is making some progress. Its deliveries increased 35% versus Q2 to 4,799 vehicles. Its vehicle margin and gross margin both improved nicely quarter-over-quarter. As a result, Nio's loss from operations fell 25% versus Q2. Its top and bottom line were both better than analysts, on average, had expected.Meanwhile, its Q4 guidance looks particularly strong. NIO expects its auto deliveries to exceed 8,000, up over two-thirds versus Q3. Research and development spending and selling, general, and administrative expenses, both of which came down in Q3, should decrease again. As a result, its operating and net losses are likely to drop further. And given that Q4 ended on Tuesday, investors should be confident about the company's outlook. * 10 2019 Winners That Will Be 2020 Losers Combine the good news with a huge short float, and the big gains by Nio stock are not surprising. Roughly 30% of the float is sold short at the moment, and short covering probably added to the huge gains of Nio stock price on Monday. The Case Against Nio StockThe problem is that all of the good news was only good relative to expectations. Its deliveries did increase 35% compared with Q2, but its revenue rose just 22.5%. Nio is generating lower revenue per unit, in part because the price of its second model, the ES6, is lower than that of its previous vehicles. The same trend will hold in Q4, as it provided guidance for a 66% QoQ unit sales jump but expects its revenue to rise "approximately" 53%.But revenue isn't the biggest issue facing Nio stock. Its top near-term problem is that Nio's margins remain negative. Its gross margin in the quarter was -12.1%. Its vehicle margin (essentially the gross margin of its vehicle sales) came in at negative 6.8% in the quarter, although that was a sharp improvement from Q2's -24.1%.Q2 margins were pressured by accrued costs relating to a broad recall. Excluding those costs, the vehicle gross margin in Q2 was -4.0%. And even with the expected spike in Q4 deliveries, NIO doesn't seem ready to forecast a huge rebound in its gross margin. Management said on the Q3 conference call that Nio "should be able" to generate positive gross margins this year. Its executives were not ready to predict positive margins for any specific quarter.Adding to bottom-line losses by selling more vehicles is not a path to prosperity. And even with its operating expenses coming down, NIO still is losing an astounding amount of money. Losses ContinueOn an operating basis, excluding some items, NIO lost 2,339 million RMB ($327.2 million) in Q3 alone. It finished the quarter with just 1,961 million RMB ($274.3 million) of cash. A $100 million convertible bond was issued to Tencent Holdings (OTCMKTS:TCEHY) during the quarter and is included in that total. NIO received another $90.5 million from its CEO, William Li, and those funds should arrive in its account shortly.Of course, even that $90 million won't get Nio very far at its current burn rates. Nio itself acknowledged as much in its Q3 press release, disclosing that its "cash balance is not adequate to provide the required working capital and liquidity for continuous operation in the next 12 months."Such disclosures usually are bearish for a stock. Indeed, Chesapeake Energy's (NYSE:CHK) shares plunged in November after it issued a similar "going concern" warning.That said, Chesapeake has other issues, and Nio is optimistic about its ability to raise more cash. Management said on the Q3 earnings call that it's continuing to hold talks aimed at raising funds. The Balance Sheet ProblemBut there's an obvious question: where will NIO get that cash? Nio doesn't have a meaningful amount of assets to put up as collateral. It has just $765 million worth of property, plant, and equipment, largely because it doesn't manufacture its own cars. (State-owned JAC Motors builds Nio's cars; earlier this year, Nio abandoned its plans to create its own manufacturing capabilities.)The central government already has offered the company something akin to a bailout. Its much-hyped deal with Intel (NASDAQ:INTC) hasn't seemed to bring in much, if any, cash.Even assuming Nio's vehicle margin dollars stay flat and its operating expenses drop another 20% in Q4 (about the rate at which they fell in Q3), Nio still will lose something close to $250 million in Q4. That's equal to almost all of its cash as of Sept. 30. The money from the CEO will only, at best, get the company through the current quarter.Nio perhaps could sell more stock, but that would lead to a precipitous decline of Nio stock price. And it seems likely, assuming its losses persist until at least 2022, that the company will need to raise at least $1 billion, which would require it to issue an enormous amount of stock, since its current market capitalization is around $4 billion.And that's assuming that its growth will continue. That's not guaranteed. Tesla (NASDAQ:TSLA) has entered the Chinese market. Daimler (OTCMKTS:DMLRY) and BMW (OTCMKTS:BMWYY) have as well. Even if NIO can maintain its market share, it's going to have to compete on price without spending more on marketing. That may be impossible.The huge rally of Nio stock looked like a short squeeze. But short squeezes don't last forever. They won't put cash in Nio's bank account. And they won't enable it to beat its competitors. Once the dust clears, the focus will return to Nio's very real problems. And I expect that will result in Nio stock giving back its gains.As of this writing, Vince Martin has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 2019 Winners That Will Be 2020 Losers * 5-Year Returns for 5 Dow Jones Stocks Entering 2020 * 5 Semiconductor Stocks to Buy for Big Gains In 2020 The post Nio Stock Will Give Back All of Its Gains appeared first on InvestorPlace.
Oil prices are spiking after the assassination, and Whiting Petroleum, Chesapeake Energy, SM Energy, Ring Energy and Matador Resources are among the big winners.
Yes, 2019 was a rough year for the energy sector. The group saw its weight dwindle in the S&P 500 en route to finishing the year as the worst-performing group in the benchmark. Still, thanks to a late-year rally, the Energy Select Sector SPDR (NYSEARCA:XLE) was able to finish the year higher.Source: Casimiro PT / Shutterstock.com However, things were much, much worse for natural gas shale producers. Consider the following. The First Trust Natural Gas ETF (NYSEARCA:FCG), an exchange-traded fund that frequently has dog status, lost almost 20% last year, but look good compared to the 60% shed by Chesapeake Energy (NYSE:CHK).Losing 60% in a year in which the S&P 500 posted its best annual showing in more than two decades alone is disturbing. Even more alarming is that Chesapeake finished the year down by that much even with the benefit of a 38.7% December rally.InvestorPlace - Stock Market News, Stock Advice & Trading TipsMuch of the December bullishness was accrued early in the month after Oklahoma-based Chesapeake was able to procure $1.5 billion in financing from a consortium of banks, helping it stave off bankruptcy. Still, some analysts believe that's no more than a temporary fix and that the capital isn't a silver bullet for Chesapeake's deep financial woes. Awash in WoesIn July 2015, the company slashed its quarterly dividend. Six months later, the company suspended the payout on its preferred shares, contributing to its lower credit ratings. Remember, preferred stocks have bond-like properties and are higher up in the pecking order than common stock in the event of bankruptcy. * 7 Stocks to Buy for January and Beyond In other words, it's bad when a company cuts or suspends its dividend on its common equity, but it's much worse when negative payout action comes to preferred stocks. When it revealed that 2015 dividend cut, Chesapeake traded close to $20.Chesapeake had a $1.7 billion market capitalization as of Jan. 2. However, its debt burden is in excess of $9 billion, or about six times its market value. Additionally, the company is grappling with annual interest expenses of $700 million. That's almost half its market cap.So it's not surprising that Moody's Investors Service recently lowered a variety of ratings on Chesapeake. What may be surprising is that the shale producer clings to ratings in "B" territory and hasn't dropped to the highly speculative "CCC" range.Keep in mind that the company recently engineered a debt swap with bondholders. Those investors received around 57 cents on the dollar for their investments. One need not be a fixed income expert to realize that financially sound companies don't engage in those type of maneuvers. Bottom Line: Chesapeake Is Cheap for a ReasonI'm fond of highlighting the potential peril of stocks with low price tags. Even though Chesapeake can offer some near-term upside, the long-term prognosis here is bleak.With the U.S. awash in oil and natural gas, Chesapeake likely needs something along the lines of oil prices at $60 per barrel and gas at $2.75 per million British thermal units. The former is doable, but Henry Hub gas closed at $2.18 on Dec. 31.Further vexing Chesapeake is that with natural gas prices low, assets are unattractive to larger oil companies. Many of those big names already enjoy robust gas footprints, so asset sales to raise capital probably aren't in the cards for Chesapeake over the near term.There are other points for investors to be aware of. Namely that all of the traditional valuation metrics on Chesapeake are low, implying value. However, the stock's performance coupled with the controversy surrounding the company likely means it's more of a value trap.As of this writing, Todd Shriber did not own any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Buy for January and Beyond * 7 Excellent Value Stocks to Buy for 2020 * 5 Hot Housing Stocks That Could Stay Hot in 2020 The post Chesapeake Energy Fighting Off Bankruptcy Doesn't Make It a Buy appeared first on InvestorPlace.
Shares of energy company's were broadly higher in premarket trading Friday, as crude oil prices soared in reaction to the U.S. airstrike that killed an Iraqi militia's deputy commander. The SPDR Energy Select Sector ETF climbed 1.4% in premarket trading, with 26 of 28 equity components trading higher. Among the ETF's more active components, shares of Noble Energy Inc. rose 0.8%, Exxon Mobil Corp. gained 1.4%, Occidental Petroleum Corp. hiked up 3.0%, Schlumberger Ltd. advanced 1.8%, Halliburton Co. rose 1.9%, Marathon Oil Corp. rallied 3.4% and Chevron Corp. tacked on 1.2%. Although not an ETF components, Chesapeake Energy Corp.'s stock shot up 5.8% in active trading. The rally bucked the reaction in the broader stock market, as S&P 500 futures sank 1.2%. Meanwhile, crude oil futures shot up 3.9%, and the intraday high of $64.09 was the highest price seen since April 30.
Chesapeake Energy (NYSE:CHK) stock has been on the road to nowhere for the past five years, taking the share price from a peak of more than $21 to below $1.00 today. The sad truth is that Chesapeake now has little chance of surviving without selling off a large portion of its oil and gas assets.Source: Casimiro PT / Shutterstock.com CHK stock at 86 cents is the moral of a cautionary tale about the use of debt in a cyclical industry. Based on last quarter's financials, the company now has over $9.1 billion in crushing debt. But shareholders equity was only $4.7 billion.Moreover, since then, the situation has deteriorated.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Chesapeake Energy's Soul-Crushing DebtThe antagonist in this cautionary tale features is negative free cash flow. Chesapeake's cash burn topped $241 million last quarter. It was still drilling oil and gas wells hoping that low gas prices would revive. That hasn't happened.Moreover, gas prices, which account for over 60% of Chesapeake Energy's revenue, stayed low in Q4. So Chesapeake started discussions with a willing buyer for a portion of its assets, according to news reports.But management got cold feet leaving Chesapeake spending late December cutting a deal with some of its most pressing debt holders. They restructured $1 billion in borrowings and exchanged it at 60% on the dollar for new notes. As a result, Chesapeake stalled the proposed $1 billion in asset sales. * 6 Transportation Stocks That Are Going Places But here's the problem. The interest rate is now much higher on this lower debt principal. So the net cash drain in interest costs is about the same.Moody's sees it this way. Here is what senior analyst John Thieroff wrote on Dec. 4, in anticipation of the deal close:"If successful, the tenders should allow Chesapeake to reduce its debt burden, simplify its corporate structure and provide better asset coverage to its creditors. "However, the high interest rate on the proposed borrowings -- the second lien notes in particular -- will limit the amount of interest expense reduction Chesapeake will achieve through the exchange."The deal closed on Dec. 20. Chesapeake Energy filed SEC documents and on Dec. 26 and Dec. 27.Yes, the deal allowed Chesapeake to stave off bankruptcy. But it did nothing to change Chesapeake's soul-crushing debt and interest costs. Chesapeake Energy Stock Needs More Asset SalesChesapeake Energy needs low energy prices to produce positive free cash flow. According to a Bloomberg Intelligence energy analyst, Chesapeake needs oil prices above $60 and natural gas above $2.75.But here's the problem. Natural gas has been crashing. Last week it fell to $2.15. Chesapeake is still burning cash.Investors in Chesapeake Energy stock can expect another bad quarter ending Dec. 31. The issue now is whether Chesapeake can stay solvent.Without the $1 billion in asset sales that it previously was considering, the company is likely running out of liquidity.Moreover, Chevron (NYSE:CVX) just announced a large asset writedown of its oil and gas assets. this will portend bad news for Chesapeake, according to at least one Seeking Alpha blogger. What Should Investors in Chesapeake Energy Stock Do?CHK stock needs 15 cents … for a month. What's that? It's the chump change that will push the share price above $1.00. And, it needs to come up with a plan to keep Chesapeake stock trading for more than a buck for more than 30 days.The only way for that to happen, without an asset sale, higher energy prices or a takeover, is for Chesapeake to do a reverse split. That means that for every share held, the company exchanges them for fewer shares. * 7 'A'-Rated Stocks to Buy Under $10 For example, this could be an exchange such as 1 new share for every 10 old shares, etc. The effect is to raise the CHK stock price by 10 times since there would be 10 times fewer shares outstanding.The problem with this financial engineering is that it is a sign of a company in trouble. Serious institutional investors know this. The reverse split brings out more short sellers betting on the fall of CHK stock. That pushes it down further.So buyer beware in Chesapeake Energy stock. The company pays no dividend, has poor economics and is close to insolvency. Unless management decides to sell assets or economic conditions push up natural gas prices, Chesapeake Energy stock will drop further.As of this writing, Mark Hake, CFA does not hold a position in any of the aforementioned securities. Mark Hake runs the Total Yield Value Guide which you can review here. The Guide focuses on high total yield value stocks. Subscribers a two-week free trial. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Stocks to Buy for January and Beyond * 7 Excellent Value Stocks to Buy for 2020 * 5 Hot Housing Stocks That Could Stay Hot in 2020 The post Without Asset Sales, Chesapeake Energy Stock Will Drop Further appeared first on InvestorPlace.
For holders of Chesapeake Energy (NYSE:CHK) stock, this has definitely been a year worth forgetting. It was downright awful. CHK stock price has tumbled about 60% this year. While the energy sector has been under pressure most of the year -- despite the rally of the stock markets -- Chesapeake Energy stock was still a negative outlier in the sector.Source: Casimiro PT / Shutterstock.com But unfortunately, this is nothing new for CHK stock. Just look at uitsaverage annual return for the past five years: roughly 45%.Basically, the best thing about CHK stock is that, well, the company will likely not go bust! If anything, the recent low set in November - 56 cents per share - may actually represent a bottom.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThat's because the company has struck a favorable debt restructuring deal with its creditors. CHK issued about $1.5 billion in new bonds, with an 11.5% coupon. While that was not cheap, it was the company's lenders agreed to reduce the principal by 30% to 35% and liberalize other terms. The deal will probably stave off an imminent fiscal crunch. As a result of the agreement, CHK stock price surged, almost hitting $1.Yet I still think investors should be cautious about Chesapeake Energy stock. The fact is that CHK stock is far from healthy. * 7 'A'-Rated Stocks to Buy Under $10 The Company's Serious IssuesConsider that CHK still has a huge debt load. It owed $9.1 billion (as of Sept. 30), compared to its market cap of roughly $1.7 billion. Moreover, it has to pay annual interest of close to $700 million. So even after the debt restructuring, CHK will still have trouble meeting its obligations.Next, CEO Robert Douglas Lawler has been overly optimistic. Sure, it's good to take a cup-half-full approach. But he's overpromised too much. For the past few years, Lawler has been predicting break-even cash flows but he has yet to deliver. What's more, for three consequence quarters, the company has missed analysts' average earnings estimates.But the biggest problem facing CHK stock is the terrible market environment. It really does look like the fracking revolution is coming apart - and quickly. According to the Wall Street Journal, the industry may produce 15% less oil and natural gas than forecasted.It appears that fracking wells peak more quickly than traditional approaches. That may be because they are often placed too close to each other.Regardless of the reasons, companies will need to invest more to sustain their production. The value of existing leases will also fall, weighing on balance sheets.In light of all this, it should be no surprise that banks are getting more cautious about lending to fossil fuel players, putting an even bigger squeeze on companies like CHK.Besides, some recent moves by major oil companies indicate that the sector is having problems. For example, Royal Dutch Shell (NYSE:RDS) and Chevron (NYSE:CVX) have announced major write downs of their portfolios. This appears to be only the start of the oil sector's reckoning. The Bottom Line on CHK Stock PriceIn the new year, there will be some other wildcards that could negatively impact CHK stock. One is the election, which could easily cause volatility in the markets in general. Energy stocks could be especially vulnerable, as the country's future energy policies will be uncertain Then there is the continued strides by alternative energy sources, which are getting more competitive with oil and gas.But of course, the key for CHK stock price is the oil and gas. But unfortunately, there are few signs of a major bull move by either commodity, as their supply-demand dynamics remain fairly unfavorable.Tom Taulli is the author of the book, Artificial Intelligence Basics: A Non-Technical Introduction. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 'A'-Rated Stocks to Buy Under $10 * 7 High-Yield Dividend Stocks for Growth and Income in the 2020s * 7 Tech Stocks to Buy As the Trade War Ends The post Chesapeake Stock: Donat Expect a Turnaround in 2020 appeared first on InvestorPlace.
Shares of oil and gas producer Chesapeake Energy Corp. swung to a loss of more than 1% in afternoon trading Monday, erasing an earlier sharp rally, as natural gas and oil prices turned south. Chesapeake's stock traded up as much as 5.0% at an intraday high of 89.70 cents soon after the open, before falling as much as 4.9% at an intraday low of 81.20 cents just after 1 p.m. Eastern. The stock has pared losses since then to trade down 1.5%. The stock was among the most actively traded on the NYSE, with volume of 50.2 million shares. Crude oil futures slipped 0.2%, reversing an earlier gain of as much as 1.0% to a 3-month intraday high, amid concerns that increasing production would cap gains, that have been fueled by expectations of global economic growth and a U.S. military strike in Iraq. Natural gas futures slumped 1.8%, after being up as much as 1.2% earlier. Chesapeake's stock has tumbled 59.9% year to date, while the SPDR Energy Select Sector ETF has gained 4.3% and the S&P 500 has surged 28.5%.