Oklahoma City-based Chesapeake Energy Corp. (NYSE: CHK) reported another significant quarterly loss on August 5, and its shares declined about 10% over investor and analyst concerns about the company's heavy debt-load and spending even as commodity prices remain too low for profitability for many US producers. Chesapeake is the No. 2-ranked gas producer in the United States.
Chesapeake's shares have plummeted in recent quarters along with declining oil and natural gas prices. The company says it intends to sell assets or pursue partnerships with other companies to help lift the burden of high drilling costs.
Nevertheless, traders on the New York Stock Exchange did not react positively to Chesapeake's financial report and the stock fell to its lowest price since April of 2003 -- $6.85 a share. As of press time for this story on August 6, the stock had rebounded to $7.83. The 52-week high for the stock was $27.24 on Aug. 29, 2014.
In the first quarter of 2015, Chesapeake was No. 11 on the OGJ150 Quarterly Report, as ranked by total assets. The company was No. 6 in total revenue for the quarter, No. 10 in year-to-date capital spending, but was ranked No. 123 in net income – far below most of its peers – with a reported net loss of more than $3.7 billion.
For the second quarter, Chesapeake reported a net loss of nearly $4.2 billion. This compares with a net profit of $145 million for the same quarter in 2014. Chesapeake’s production rose 1.1% to 63.9 million barrels of oil equivalent in the second quarter, but the average realized price dropped more than 40% to $16.08/boe.
Analysts at several investment banks have reported that Chesapeake will continue to pursue asset monetizations, and in a report published on Aug. 3, SunTrust Robinson Humphrey analyst Neal Dingmann noted that Chesapeake is "one of the most asset-rich companies" among his coverage with a net asset value "well north" of his $15 price target. He added that the company's large position could enable it to carve off non-core asset sales as it did in 2014 when it sold assets in the Marcellus and Utica plays for nearly $5 billion.
Dingmann said he "would also not be surprised" to see an asset-light company "make a run" at Chesapeake in order to acquire its significant holdings in the company's seven operating regions.
SunTrust Robinson Humphrey upgraded CHK from "neutral" to "buy," while Credit Suisse downgraded the company from "outperform" to "neutral," and Simmons & Co. also downgraded CHK from "overweight" to "neutral."