Analyzing Chesapeake’s Stock Performance since Its 4Q15 Earnings



Chesapeake’ stock performance

In this final part of our series on Chesapeake Energy (CHK), we’ll be comparing the company’s stock movements with respect to movements in the broader market in crude oil and natural gas prices and in the US Dollar Index.

As we saw in Part 1 of this series, Chesapeake’s stock fell nearly 71% YoY (year-over-year).

Surprisingly, Chesapeake Energy has a low correlation of 0.1 with natural gas prices since March 2015 to present. Moreover, its near-term three-month and one-month coefficients are negative. This means that natural gas prices could have a positive impact on the stock, albeit marginally, only on a long-term basis. So, much of its rally has to do with its asset sale announcement in its 4Q15 earnings. Chesapeake announced asset sales amounting to $700 million, which it plans to close by the end of 2Q16. Its turnaround is also due to investors’ change of opinion on the likelihood of Chesapeake filing for bankruptcy.

Many upstream companies such as WPX Energy (WPX), Hess (HES), and Apache (APA) took a hit due to weak commodity prices. YoY, their stocks fell by 43%, 25%, and 20%, respectively. All of these companies account for ~10% of the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).

From the above graph, you can see that Chesapeake stock gave lower returns compared to the West Texas Intermediate and natural gas returns on a YoY basis.

Compared to the broader market, the S&P 500 ETF (SPY), Chesapeake underperformed SPY. As you can see in the graph, Chesapeake is negatively correlated to the US Dollar Index. Since March 2015, the US Dollar Index has returned approximately -3%.

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