Icahn Associates Raises Stake in Chesapeake Energy to around 11%



Icahn adds to stake in Chesapeake Energy

Icahn Associates boosted its position in Chesapeake Energy (CHK) in March. The fund disclosed 73,050,000 shares, or a 10.98% stake, through an amended 13D filing. The fund held 66,450,000 shares at the close of the fourth quarter ending in December, according to its last 13F filing.

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Capex cut due to concerns about commodity prices

In March, Chesapeake Energy announced a cut in its total capex (capital expenditures) to $3.5 billion from $4 billion for 2015. This was a huge reduction from the capex of $6.7 billion for 2014. The company also announced a decline in its targeted production for the year. It said it expects to operate 25–35 rigs in the current year. This is down 55% from the 64 rig average in 2014. The company said, “In response to continued weak commodity prices, we are further reducing capital expenditures and associated drilling activity.”

4Q14 earnings missed estimates

For 4Q14, Chesapeake Energy reported revenue of $5.05 billion, reflecting an 11% YoY (year-over-year) growth. It exceeded analysts’ estimates of $4.5 billion. The revenue growth was driven by higher realized and unrealized hedge gains. Production averaged 729,000 barrels of oil equivalent in 4Q14. This reflected a 12% increase when adjusted for asset sales.

For a more detailed analysis of Chesapeake Energy’s fourth quarter results, please read Chesapeake Energy’s 4Q2014 earnings reflect market volatility.

Investors wanting to gain exposure to Chesapeake Energy and its peers can consider the Energy Select Sector SPDR ETF (XLE). Chesapeake Energy and its peers account for 4% of XLE’s holdings.

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Sells certain Marcellus and Utica Shale assets

In 4Q14, Chesapeake Energy sold certain assets in the southern Marcellus and eastern Utica shales for net proceeds of $5.1 billion.

A recent article on our website noted that March production rose at key shales, according to the EIA (U.S. Energy Information Administration). These trends are bound to benefit Chesapeake Energy as well as EOG Resources (EOG), Pioneer Natural Resources (PXD), CONSOL Energy (CNX), and Range Resources (RRC). Chesapeake Energy has 0.67% exposure to the Energy Select Sector SPDR Fund (XLE).

Overview of Chesapeake Energy

Chesapeake Energy is a US energy exploration and production company. Its operations cover the following shales:

  • Barnett
  • Eagle Ford
  • Haynesville
  • Marcellus
  • Mississippian Lime
  • Niobrara
  • Utica

Currently, Chesapeake Energy is the second largest producer of natural gas and the 11th largest producer of liquids in the US. The company produces more than 720,000 barrels of oil equivalent per day. It operates in both the upstream and downstream spaces. Its operations can be broadly categorized into the following two segments­­:

  • Exploration and Production – accounts for nearly 40% of its revenue
  • Marketing, Gathering, and Compression – represents the other 60% of its revenue

The next part of this series will highlight the fund’s increased position in Federal-Mogul Holdings.


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