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Can Chesapeake Energy Stock Sustain the Uptrend?

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Can Chesapeake Energy Stock Sustain the Uptrend? PART 1 OF 4

How Far Could Crude Oil Prices Take Chesapeake Energy Stock?

Chesapeake Energy stock

Maintaining its upward trend from the previous week, Chesapeake Energy (CHK) stock rose 5.5% in the week ended September 22, 2017. However, the stock traded at lower levels compared to the beginning of 2017. Since the year started, Chesapeake Energy stock has fallen 39%.

How Far Could Crude Oil Prices Take Chesapeake Energy Stock?

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The uptick in Chesapeake Energy’s stock price has come on the back of recovering crude oil prices. Crude oil prices rose to their highest levels in four months, settling at $50.66 per barrel on September 22, 2017. They rose above $50.00 per barrel on September 20 for the first time in four months. 

On July 31, 2017, prices had settled at $50.17 per barrel, only to fall back to sub-$50 the next day. Since September 20, 2017, crude oil prices have closed above $50.00 for three consecutive days. On September 25, 2017, crude oil prices were trading around $52.00 per barrel.

The improvement in crude oil prices positively affected the Energy Select Sector SPDR ETF (XLE) as well. The energy ETF rose ~2% in the week ended September 22, 2017. Since the beginning of this year, however, XLE has declined ~12%. To learn more about why crude oil prices have been rising, you can check Are US Crude Oil Prices Ready to Hit $60?

Crude oil prices are an important component of CHK’s growth in 2017. The company has been increasing its focus on oil-weighted production growth in 2017. So, the fate of crude oil prices could be crucial for the company this year. Therefore, energy investors should be watching to see if the increase in energy prices is sustainable.

While crude oil prices are important for the CHK’s growth, the company still struggles with a massive debt load. For more information, please read What Does Chesapeake Energy’s Debt Position Indicate? The company has taken several steps to counter its debt load since 2016. These include its Barnett shale asset divestiture and Haynesville divestiture, which resulted in the removal of $580.0 million in CHK’s midstream commitments.

Following these efforts, CHK removed or extended more than $3.1 billion in maturities from 2017 through 2019, with only $450.0 million coming due in this period.

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