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Chesapeake Energy stock settles at lowest value in 26 years Thursday

Chesapeake Energy Corp.'s headquarters in Oklahoma City is pictured. [OKLAHOMAN ARCHIVES]
Chesapeake Energy Corp.'s headquarters in Oklahoma City is pictured. [OKLAHOMAN ARCHIVES]

The stock for Oklahoma-based Chesapeake Energy closed at its lowest value in 26 years on Thursday at 48.5 cents a share.

The last time a Chesapeake stock share closed at 50 cents or less was Jan. 10, 1994, when it finished trading that day at 47 cents per share.

Its shares are traded on the New York Stock Exchange under the ticker CHK.

It already is in danger of being delisted from the exchange, after getting a notification in early December that its share value had closed at less than $1 for 30 consecutive days between Oct. 21 and Dec. 2.

Some analysts on Thursday attributed investors’ lack of appetite for Chesapeake shares to ongoing concerns about global oil demand in light of the coronavirus outbreak in China.

However, Zac A. Reynolds, chief investment officer at Full Sail Capital in Oklahoma City, pointed to other more closely related issues involving the company as reasons for investors’ malaise with the company’s stock.

“We are seeing the market continue to react to the company’s debt level,” Reynolds said.

Chesapeake, he noted, revealed in a regulatory filing it made in November that it anticipated it might have problems meeting ever-tightening lending restrictions if oil and natural gas prices remained low.

“Failure to comply … would result in an event of default under our Chesapeake revolving credit facility, the potential acceleration of outstanding debt thereunder and the potential foreclosure on the collateral securing such debt, and could cause a cross-default under our other outstanding indebtedness,” the filing stated.

That, it continued, would raise “substantial doubt about our ability to continue as a going concern," the company stated.

The company also announced at the same time it was slashing its drilling and completions budget by 30% for this year, hoping to keep its oil production relatively stable.

On Thursday, Reynolds applauded Chesapeake’s board and executive team for making the progress they have the past six years to improve the company’s operational and financial metrics.

“They have done asset sales and renegotiated debt,” Reynolds said. “But (they) were dealt a tough hand to start with. I think they have done what they can.

“Now, they need commodity prices to help them out, or someone to come in, find them really attractive” and acquire it.

The problem with that, he continued, is that while other companies may find Chesapeake’s assets attractive, its debt isn’t.

“I think Chesapeake’s stock price is reflective of those concerns," he said. "The company is in a very tough position.”

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›