So far in 2020, Chesapeake Energy (NYSE:CHK) has fallen 95.7%. The decline was sharper than a fall of 44.5% in the SPDR S&P Oil & Gas Explore & Production ETF (NYSEARCA:XOP). XOP tracks US upstream oil and gas companies. On a year-to-date basis, the S&P 500 has fallen 12%.
Last month, negative crude oil prices and natural gas below $2 per MMBtu led a fall of 79.5% in Chesapeake Energy’s stock prices. On Monday, the stock prices were near the lowest level in more than 20 years.
Bad luck for Chesapeake Energy investors
Initially, Chesapeake Energy’s management focused on increasing its natural gas output. The gain in natural gas prices before 2009 helped the stock rise to an all-time high. However, with the US shale oil revolution, natural gas supplies rose. Since 2009, natural gas prices and Chesapeake Energy’s stock prices have been in a downturn. In May 2019, natural gas prices in the Permian Basin turned negative. Chesapeake Energy’s management decided to increase its production mix in oil to tap higher oil prices. Since then, oil prices have been falling.
Will Chesapeake Energy recover in 2020?
The ongoing months are the shoulder season for natural gas, which means that the demand will be lower. However, the summer season will start in the US at the beginning of June. This summer could be different from the last few summers. The COVID-19 outbreak has forced US citizens to stay at home. The trend could continue throughout the summer. So, there might be more demand for natural gas for power requirements. Higher natural gas prices could support Chesapeake Energy’s stock prices.
The COVID-19 death curve continues to flatten across the US and Europe. China has already reopened its economy. Oil prices could rise in the rest of 2020 if the situation improves, which could be another positive development for Chesapeake Energy.
Analysts’ estimates and technicals
Among the 15 analysts tracking Chesapeake Energy, 93% recommended a “sell” or a “strong sell,” while 7% recommended a “hold” based on Reuters data. Notably, none of the analysts recommend a “buy” on the stock. Analysts’ mean target price for Chesapeake Energy is $39.12, which is 151.3% above the last closing level.
Yesterday, Chesapeake Energy stock closed 39.3% below its 20-day moving average. Moreover, the stock prices were 58.5%, 82.2%, 91.2% below the 50, 100, and 200-day moving averages, respectively. The stock price below these key moving average suggests a bearish trend.