Chesapeake Energy shares tumble after company’s loss widens, unveils drastic capex cuts

According to Zacks Investment Research, “Chesapeake Energy Corp.is an independent oil and gas company engaged in the development, exploration, acquisition and production of onshore natural gas and oil reserves”.

Chesapeake is budgeting total capital expenditures (including capitalized interest) of $1.3 to $1.8 billion for 2016, a 57% reduction using the midpoint from 2015 ” s CAPEX total of $3.6 billion. This would lead to the yearly production decline of 0% to 5%, after adjusting for asset sales. Its adjusted loss per share came to 16 cents, a penny less than the 17 cents-per-share FactSet consensus. Chesapeake stock rose for 5 consecutive days till Monday, posting gains of over 50%, during an upward rally in oil prices, and over its plans to repay debt notes worth $500 million maturing next month.

The stock fell as much as 51 percent on February 8 to the lowest since it began trading in 1993 after a news report that Chesapeake hired restructuring attorneys; the company issued a statement that same day saying that it had no intention of filing for bankruptcy protection. Analysts expected revenue of $3.02 billion for the quarter. Post opening the session at $2.53, the shares hit an intraday low of $2.16 and an intraday high of $2.71 and the price vacillated in this range throughout the day.

Chesapeake has agreed to divest assets worth $700 million, up from the company’s previous target for asset divestitures between $200 million and $300 million. They now own 625.58 million shares or 3.70% more from 603.23 million shares in 2015Q2. As of December 31, 2014, the company had estimated proved reserves of 2.469 billion barrels of oil equivalent.

The analyst consensus one year target estimates for Chesapeake Energy Corporation is at $4.00. As we noted in our preview of Chesapeake’s earnings, the company said that it will repay the remaining balance on its 3.25% senior notes due next month. It expects to have between 4 and 7 this year.

In January Chesapeake said it suspended dividends on its preferred shares in a move to conserve cash and pay down its debt. Chesapeake also said that it “expects to take advantage of the significant discounts in the prices of its debt securities in 2016”. The company also holds interests in liquids-rich resource plays, such as the Eagle Ford Shale in South Texas; the Utica Shale in OH and Pennsylvania; the Granite Wash/Hogshooter, Cleveland, Tonkawa, and Mississippi Lime plays in the Anadarko Basin in northwestern Oklahoma and the Texas Panhandle; and the Niobrara Shale and Upper Cretaceous sands in the Powder River Basin in Wyoming. Williams Companies Inc’s. (NYSE:WMB) cash flows are most exposed to Chesapeake, compared to other mid-stream oil pipeline companies.