Chesapeake Energy Drops 18%, Gas Prices Raise Worries About Company’s Ability to Continue

November 5, 2019

Chesapeake Energy shares were way down on Tuesday after the production company missed 3Q expectations, in what analysts call the “sharpest one day drop” in more than three years, while the company also warned that if natural gas prices continue to be “depressed,” there is “substantial doubt” that the company can continue as a “going concern.”

CHK stock dropped about 18% on the day, its worst after-earnings-release drop in more than 10 years, New York Stock Exchange analysts said late in the trading day.

Chesapeake’s average realized natural gas price dropped nearly 12% during the third quarter, the company said in a statement — its stock has lost 98% of its value since closing at a record high of $65.63 in July 2008.

And the Oklahoma City-based company said in a filing with the US Securities and Exchange Commission that at current crude and gas prices there is substantial concern about the ability of Chesapeake to continue operations, CNN reported Tuesday afternoon, because it’s “drowning in $10 billion in debt.”

CNN sees the development as ironic, considering Chesapeake, under founder Aubrey McClendon, was considered one of the prime innovators of the fracking movement that has revolutionized the oil business in recent years.

“At one point it was the nation’s No. 2 natural gas producer.”

The company announced a quarterly loss of $0.11 per share versus the Zacks Consensus Estimate of a loss of $0.10. This compares to earnings of $0.19 per share a year ago, adjusted for non-recurring items.

Zacks said the quarterly report represents an earnings surprise of -10%.

A quarter ago, it was expected that this natural gas company would post a loss of $0.07 per share when it actually produced a loss of $0.10, delivering a surprise of -42.86%.

Over the last four quarters, the company has surpassed consensus EPS estimates just once.

Chesapeake posted revenues of $1.17 billion for the quarter ended September 2019, surpassing the Zacks Consensus Estimate by 0.06%.

This compares to year-ago revenues of $1.20 billion.

The company has topped consensus revenue estimates three times over the last four quarters, Zacks noted.