Will Rising Crude Be Enough for CHK Investors?

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Will Rising Crude Be Enough for CHK Investors? PART 1 OF 3

Crude Oil’s Supporting CHK, But Is It Enough for CHK Investors?

Chesapeake Energy stock

Chesapeake Energy (CHK) climbed higher last week, bouncing back from the lows we saw throughout October. In the week ended November 6, 2017, Chesapeake Energy stock rose 8.8%, but YTD (year-to-date), CHK stock has fallen ~40%.

Crude Oil&#8217;s Supporting CHK, But Is It Enough for CHK Investors?

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CHK stock has been mirroring crude oil prices and natural gas prices. The uptick in CHK stock could be blamed on crude oil prices, which have been on an uptrend.

Since crude oil prices rose above $50 per barrel for the first time in almost two months, on September 20, they have risen 13.5% as of November 6.

CHK stock fell initially last week

CHK stock initially tanked last week, following its 3Q17 results release on November 2, likely because the company missed its 3Q17 revenue estimate. Its revenues were lower both on an annual basis and a sequential basis.

Another factor that could have driven CHK stock lower was its announcement that it would be increasing its capital expenditure guidance range for 2017 from the previous $2.1 billion–$2.5 billion, to a new range of $2.3 billion–$2.5 billion.

Higher spending might not be welcomed by investors. Chesapeake’s principal debt balance as of the end of 3Q17 was ~$9.8 billion, compared with its market capitalization of $3.7 billion.

Likely as a result of these announcements, CHK’s stock fell ~7.6% on November 2.

The turnaround

Political disturbances in Saudi Arabia over the weekend caused oil prices to surge on November 6, Monday. Prices closed at $57.23 per barrel—2.8% above the previous close. (To know more, read Pre-Market Report: Global Markets Are Strong on November 7.)

As oil growth is a key part of CHK’s 2017 strategy, the direction that crude oil prices take will likely be crucial for the company. Indeed, because of the rise in crude oil prices on Monday, CHK stock rose 11.7% the same day, offsetting the losses it saw the previous week.


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