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Crude Oil Prices Impacted Chesapeake Energy Stock

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Oct. 10 2017, Published 5:34 a.m. ET

Chesapeake Energy stock

Chesapeake Energy (CHK) dipped last week after crude oil prices fell below $50 per barrel for the first time in almost two weeks. On October 4, 2017, crude oil prices closed at $49.98—approximately 1% lower than the previous close. On the same day, Chesapeake Energy stock fell ~0.5%. In the week ending October 6, Chesapeake Energy fell 2.3% and broke its rising streak. Chesapeake Energy stock posted weekly gains for three consecutive weeks before it ended up lower on October 6.

Chesapeake Energy stock has fallen ~39% year-to-date.

As you can see in the above chart, Chesapeake Energy stock has been tracking the movement in crude oil prices (USO) (DBO). The stock is trading at significantly lower levels compared to the beginning of the year.

The Energy Select Sector SPDR ETF (XLE), which is also driven by crude oil prices along with natural gas prices (UGAZ) (UNG), has fallen ~11% since the beginning of the year.

Chesapeake Energy and XLE have underperformed the broader market (SPY). The S&P 500 ETF (SPY) has risen ~13% since the beginning of the year.

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What impacted crude oil prices last week?

Crude oil prices fell as the markets weighed reports of a rise in US crude oil production in the U.S. Energy Information Administration’s weekly release on October 4. The fall was offset by comments from Russia’s President Vladimir Putin that OPEC’s (Organization of the Petroleum Exporting Countries) production cut could be extended. Read Is It the Beginning of the Bear Market for Crude Oil Prices? to learn more about trends in crude oil prices.

Crude oil prices impacted Chesapeake Energy stock

Chesapeake Energy has been increasing its focus on oil-weighted production this year. So, the direction crude oil prices take will impact the company’s overall growth this year.

Regarding its crude oil production forecasts, Chesapeake Energy announced on September 26, 2017, that due to a combination of events related to Hurricane Harvey, asset sales, and adjustments in its capital allocation, the company expects its 3Q17 oil volumes to be lower at ~86,000 barrels of oil per day—compared to 2Q17 oil volumes of ~88,400 barrels of oil per day. Lower oil volumes could result in lower 3Q17 oil revenues, which might have caused Chesapeake Energy stock to fall last week.

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