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How Natural Gas Prices Are Impacting Chesapeake Energy Stock

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Oct. 11 2020, Updated 12:32 p.m. ET

Chesapeake Energy’s stock performance

Chesapeake Energy (CHK) started 2017 on a bad note. It was on a marked downtrend until late March when it started gaining upward momentum, imitating natural gas prices (UNG) (UGAZ). However, as things went downhill for natural gas prices in mid-April, CHK stock started falling again.

CHK stock has fallen ~20.4% since the beginning of 2017, mirroring natural gas prices (UNG)(UGAZ) for the most part.

Natural gas prices have fallen ~8.5% since the beginning of the year, while crude oil prices have fallen 5.3% in the same period. Chesapeake Energy also underperformed the Energy Select Sector SPDR ETF (XLE), which has returned approximately -10.0% year-to-date.

The S&P 500 ETF (SPY) (SPX-INDEX) has returned ~6.0% during the same period. The energy sector (XLE) makes up ~7.0% of SPY. CHK makes up ~0.50% of XLE.

Since CHK has been focusing on oil growth this year, oil prices could weigh heavily on the company’s future.

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Investor concerns for CHK

Chesapeake Energy (CHK) plans to boost spending this year. To finance the spending, it will need sufficient cash flow. If it takes on more debt to fund its spending, investors may not be happy.

One of Chesapeake Energy’s significant achievements in 2016 was its debt management efforts throughout the year. The efforts included a combination of debt exchanges, open market repurchases, and equity-for-debt exchanges. Asset sales were another key strategy the company used to reduce debt.

Having said that, CHK continues to struggle under a huge debt load, despite its many efforts last year.

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