Chesapeake Energy Corporation (NYSE:CHK) HEFFX Highlights
- Chesapeake Energy needs higher oil and gas prices to justify the current share price.
- GAAP results overstate cash profitability as annual capex required to maintain production volumes is much greater than annual DD&A expense.
- The company will struggle to maintain current production volumes while meeting its interest expense and preferred dividend obligations in the current commodity price environment.
- CHK shares are not an attractive investment from a risk/reward standpoint.
- Chesapeake Energy (NYSE:CHK) shares have lost over 40% of their value from the 52 week high of $8.20 reached in December 2016 as investor enthusiasm declined alongside commodity prices. The company has a common stock market cap of about $4.12 billion based on a price of $4.54 per share and approximately 908 million shares outstanding as of July 7, 2017.
- Despite this large decline in share price and memories of CHK trading in the teens present in investors’ minds, I believe the stock is still overvalued and does not represent an attractive risk/reward opportunity.
Chesapeake Energy Corporation produces natural gas, oil and natural gas liquids (NGL) in the United States. It operates in two segments: Exploration and Production, and Marketing, Gathering and Compression. Exploration and production is engaged in finding and producing oil, natural gas and NGL. Marketing, gathering and compression is engaged in marketing, gathering and compression of oil, natural gas and NGL. As of December 31, 2016, it owned interests in approximately 22,700 oil and natural gas wells. It has a diverse resource base of onshore the United States unconventional natural gas and liquids assets. It has positions in resource plays of the Eagle Ford Shale in South Texas, the Utica Shale in Ohio, the Anadarko Basin in northwestern Oklahoma and the stacked pay in the Powder River Basin in Wyoming. Its natural gas resource plays are the Haynesville/Bossier Shales in northwestern Louisiana and East Texas and the Marcellus Shale in the northern Appalachian Basin in Pennsylvania.
Overall, the bias in prices is: Downwards.
Short term: Prices are stalling.
Intermediate term: Prices are trending.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 5.32.
The projected upper bound is: 5.34.
The projected lower bound is: 4.32.
The projected closing price is: 4.83.
CHESAPEAKE ENER closed up 0.120 at 4.840. Volume was 100% below average (consolidating) and Bollinger Bands were 32% narrower than normal.
Open High Low Close Volume
4.840 4.840 4.840 4.840 6
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 4.81 5.12 5.96
Volatility: 57 64 61
Volume: 26,477,550 38,221,608 44,200,880
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
CHESAPEAKE ENER gapped up today (bullish) on light volume. Possibility of a Common Gap which usually coincides with a lack of interest in the security. Common Gaps are fairly irrelevent for forecasting purposes. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
CHESAPEAKE ENER is currently 18.8% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of CHK at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on CHK and have had this outlook for the last 52 periods.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 53.9403. This is not an overbought or oversold reading. The last signal was a buy 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.45. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 85 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 36. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 8 period(s) ago.
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