CHK to sell Mississippi Lime assets for $500 Million
http://newsok.com/chesapeake-energy-...rticle/5582438
Chesapeake acquires 400K+ acres in the Eagleford with acquisition of Wild Horse Resource Development (WRD) for $4 billion:
http://investors.chk.com/2018-10-30-...Stock-And-Cash
http://ir.wildhorserd.com/press-rele...018/10-30-2018
CHK was down 10% in pre-market trading.
Market has hated every M&A lately so if it plummets that’s not a good thing, but not necessarily surprising either.
Wall Street in general hates energy right now
Why is this, in your opinion? I know commodity prices aren't high, but they aren't low either. Is it that there are too many competitors in the market (a theory I heard from one oil industry expert who expects many mergers to occur)? Is it bad management? Is it low expected future demand?
Well right now today it’s because everyone hates stocks.
But a month ago when energy equities where down while everything was up it was a bunch of factors. In order-
- Lack of trust they’ll hold spending in check
- Still a lot of bad blood over fund managers getting burned in the crash
- The enormous salaries and wages everyone makes. From ceo to a level 1 engineer
- Green energy taking a decent chunk of the investments. Not so much worried about demand destruction, but it’s just not as sexy as being green.
-disbelief shale is sustainable
i would add that you have a number of companies who re-hedged as prices started to come up (say around $50), such that they are not completely exposed to today's higher strip prices.
you also have the well-documented issues in places like the Permian (lack of takeaway capacity, Midland is still Midland, resulting in discounts to the major indices because of said issues)
a number of these operators are still smarting from a period of low prices. the balance sheets, and, more importantly, the earnings aren't in a place that inspires confidence.
and I think the biggest issue has been opportunity cost. if i'm an investor with a specific amount of capital, why would I plug it into an industry that has delivered, at best, flat returns when I could put that same capital to work in shares of deeply undervalued companies like Signet Jewelers or even Twitter, for that matter?
That explains part of it but,
Look at CLR stock, they are unhedged, don’t operate in Midland, growing rapidly and making money hand over fist, while keeping capex in line. Stock off 25% from highs.
Devon has crashed from 45 to 30 in a matter of about 2 months. They’re hedged so protected from Permian diffs.
All the stock prices are struggling and it’s just energy isn’t sexy right now.
https://kfor.com/2018/10/30/chesapea...-billion-deal/
kind of overlap but only about chk
CHK acquires WildHorse
http://investors.chk.com/2019-01-31-...-Consideration
They let go about 50 employees today and last week.
I believe they are below 1,500 workers now.
Still, that's a lot of high-paying jobs and it would pretty bad if they had to fold.
BTW, that article says that market value for CHK was once over $37 billion and is now down to $2.6B.
They also once employed about 5,000.
Some of that is CHK fault, some of it is they were valued $37 billion on the assumption nat gas is rare and valuable. It is now no longer either.
And CHK has sold a lot of assets, much smaller company.
Also divested the oil field service companies and the midstream
They will likely go bankrupt within 2 years, reorganize, and emerge with a much stronger balance sheet.
They issued a going concern in their earnings release today
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