Why Did Chesapeake Stock Come Under Pressure Last Week?


Dec. 19 2017, Updated 2:05 p.m. ET

Chesapeake Energy stock

Chesapeake Energy (CHK) stock continued to fall in the week ended December 15, 2017, by 4.6% from the previous week. This year, CHK stock has fallen 49%.

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Performance this year

As the graph above shows, Chesapeake stock has performed poorly compared to the broader energy industry (XLE), which has fallen ~10% this year. Chesapeake stock and XLE have both underperformed the broader market (SPY) (SPX-INDEX) by a significant margin. SPY has risen ~18% since the beginning of the year.

What caused CHK stock to fall last week?

While crude oil prices (USO) (DBO) were a bit shaky last week, it was natural gas prices (UNG) (UGAZ) that likely led to the fall in CHK stock. In the week ended December 15, natural gas prices (NG in the graph above) fell ~6% from the previous week. Year-to-date, natural gas prices have fallen ~21.5%. Natural gas prices fell after unfavorable weather forecasts and the US Energy Information Administration reported a below-average fall in natural gas inventories.

What’s pressured CHK stock this year?

CHK stock has remained under pressure this year due to its huge debt of ~$10 billion. The company has a market capitalization of ~$3.3 billion and generated operating cash flow of only $337 million in 3Q17. Investors will likely be watching how the company plans to tackle its debt in 2018. CHK management has announced a goal of $2 billion–$3 billion in asset sales over the next several years. CHK holds significant acreage positions in the Marcellus Formation, Eagle Ford Shale, and Powder River Basin.


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