Chesapeake Energy’s stock performance
Following Chesapeake Energy’s (CHK) 4Q15 earnings release, its stock jumped ~23%. However, CHK’s stock has fallen ~87% YoY (year-over-year).
In the above graph, we analyze CHK’s stock performance with respect to broader industry and broader market movements.
In the weeks between February 10 and February 24, 2016, CHK’s earnings release date, CHK outperformed the broader energy industry indicator, the Energy Select Sector SPDR ETF (XLE), which has fallen ~29% YoY. CHK also outperformed the broader market SPDR S&P 500 ETF (SPY), which has fallen ~9% YoY.
It’s clear that CHK’s post-earnings release jump in price had little to do with energy price movements. The company announced asset sales amounting to $700 million, which it plans to close by the end of 2Q16. This was more than the $200–$300 million target it had announced in its 3Q15 earnings.
The company also stated that it’s targeting an additional $500 million–$1 billion in asset divestitures in 2016. These asset sales are expected to lower CHK’s 2016 production by approximately 31,000 barrels of oil equivalent per day. This news, along with CHK’s significant capital expenditure cut, lifted stock prices on February 24, 2016.
Many upstream companies have slashed their 2016 capital expenditures. Anadarko Petroleum (APC), ConocoPhillips (COP), and Hess (HES) have announced capex cuts of ~50%, ~37%, and 40%, respectively, compared to 2015 levels. All these companies make up ~8% of the Energy Select Sector SPDR ETF (XLE).