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Also traded in: Brazil, Germany, Mexico

GuruFocus Financial Strength Rank measures how strong a company’s financial situation is. It is based on these factors

1. The debt burden that the company has as measured by its Interest coverage (current year).
2. Debt to revenue ratio. The lower, the better
3. Altman Z-score.

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

Financial Strength : 2/10

vs
industry
vs
history
Equity to Asset -0.10
CHK's Equity to Asset is ranked lower than
87% of the 444 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 0.51 vs. CHK: -0.10 )
Ranked among companies with meaningful Equity to Asset only.
CHK' s Equity to Asset Range Over the Past 10 Years
Min: -0.33  Med: 0.37 Max: 0.56
Current: -0.1
-0.33
0.56
F-Score: 3
Z-Score: -2.88
M-Score: -5.27
WACC vs ROIC
7.61%
-53.62%
WACC
ROIC
GuruFocus Profitability Rank ranks how profitable a company is and how likely the company’s business will stay that way. It is based on these factors:

1. Operating Margin
2. Trend of the Operating Margin (5-year average). The company with an uptrend profit margin has a higher rank.
••3. Consistency of the profitability
4. Piotroski F-Score
5. Predictability Rank•

The maximum rank is 10. A rank of 7 or higher means a higher profitability and may stay that way. A rank of 3 or lower indicates that the company has had trouble to make a profit.

Profitability Rank is not directly related to the Financial Strength Rank. But if a company is consistently profitable, its financial strength will be stronger.

Profitability & Growth : 7/10

vs
industry
vs
history
Operating margin (%) -80.02
CHK's Operating margin (%) is ranked lower than
55% of the 456 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -62.85 vs. CHK: -80.02 )
Ranked among companies with meaningful Operating margin (%) only.
CHK' s Operating margin (%) Range Over the Past 10 Years
Min: -148.22  Med: 13.79 Max: 46.59
Current: -80.02
-148.22
46.59
Net-margin (%) -70.72
CHK's Net-margin (%) is ranked higher than
52% of the 456 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -78.60 vs. CHK: -70.72 )
Ranked among companies with meaningful Net-margin (%) only.
CHK' s Net-margin (%) Range Over the Past 10 Years
Min: -115.05  Med: 6.74 Max: 27.34
Current: -70.72
-115.05
27.34
ROE (%) -474.88
CHK's ROE (%) is ranked lower than
97% of the 446 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -20.44 vs. CHK: -474.88 )
Ranked among companies with meaningful ROE (%) only.
CHK' s ROE (%) Range Over the Past 10 Years
Min: -474.88  Med: 5.6 Max: 21.85
Current: -474.88
-474.88
21.85
ROA (%) -37.58
CHK's ROA (%) is ranked lower than
71% of the 526 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -14.32 vs. CHK: -37.58 )
Ranked among companies with meaningful ROA (%) only.
CHK' s ROA (%) Range Over the Past 10 Years
Min: -50.58  Med: 3.08 Max: 9.88
Current: -37.58
-50.58
9.88
ROC (Joel Greenblatt) (%) -47.10
CHK's ROC (Joel Greenblatt) (%) is ranked lower than
63% of the 504 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -22.43 vs. CHK: -47.10 )
Ranked among companies with meaningful ROC (Joel Greenblatt) (%) only.
CHK' s ROC (Joel Greenblatt) (%) Range Over the Past 10 Years
Min: -80.24  Med: 6.48 Max: 19.58
Current: -47.1
-80.24
19.58
Revenue Growth (3Y)(%) 0.20
CHK's Revenue Growth (3Y)(%) is ranked higher than
69% of the 384 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -12.00 vs. CHK: 0.20 )
Ranked among companies with meaningful Revenue Growth (3Y)(%) only.
CHK' s Revenue Growth (3Y)(%) Range Over the Past 10 Years
Min: -10.2  Med: 16.7 Max: 43.8
Current: 0.2
-10.2
43.8
EPS Growth (3Y)(%) 148.60
CHK's EPS Growth (3Y)(%) is ranked higher than
96% of the 278 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -1.40 vs. CHK: 148.60 )
Ranked among companies with meaningful EPS Growth (3Y)(%) only.
CHK' s EPS Growth (3Y)(%) Range Over the Past 10 Years
Min: -46.6  Med: -1.4 Max: 148.6
Current: 148.6
-46.6
148.6
» CHK's 10-Y Financials

Financials


Revenue & Net Income
Cash & Debt
Oprt. Cash Flow & Free Cash Flow
Oprt. Cash Flow & Net Income

» Details

Guru Trades

Q4 2015

CHK Guru Trades in Q4 2015

Paul Tudor Jones 18,573 sh (New)
Murray Stahl 145,168 sh (+64.79%)
Arnold Schneider 3,342,901 sh (+42.11%)
Jeremy Grantham 83,500 sh (unchged)
Carl Icahn 73,050,000 sh (unchged)
Bill Nygren 12,000,000 sh (unchged)
John Buckingham Sold Out
David Dreman Sold Out
Andreas Halvorsen Sold Out
Ray Dalio 183,800 sh (-2.55%)
Charles Brandes 11,305,642 sh (-3.60%)
Mason Hawkins 55,671,392 sh (-3.86%)
Richard Snow 371,355 sh (-14.11%)
John Rogers 227,230 sh (-15.07%)
» More
Q1 2016

CHK Guru Trades in Q1 2016

David Dreman 4,520 sh (New)
John Griffin 7,060,000 sh (New)
Jeremy Grantham 179,300 sh (+114.73%)
Mason Hawkins 61,926,151 sh (+11.24%)
Carl Icahn 73,050,000 sh (unchged)
Bill Nygren Sold Out
Richard Snow Sold Out
Ray Dalio Sold Out
Arnold Schneider 2,700,261 sh (-19.22%)
Murray Stahl 104,932 sh (-27.72%)
Paul Tudor Jones 12,300 sh (-33.77%)
John Rogers 137,360 sh (-39.55%)
Charles Brandes 1,936,594 sh (-82.87%)
» More
Q2 2016

CHK Guru Trades in Q2 2016

Pioneer Investments 22,209 sh (New)
Steven Cohen 793,800 sh (New)
Jim Simons 4,156,403 sh (New)
Arnold Schneider 3,496,549 sh (+29.49%)
John Griffin 8,600,000 sh (+21.81%)
Carl Icahn 73,050,000 sh (unchged)
John Rogers Sold Out
Paul Tudor Jones Sold Out
Charles Brandes 1,916,513 sh (-1.04%)
Murray Stahl 93,652 sh (-10.75%)
Jeremy Grantham 140,547 sh (-21.61%)
David Dreman 3,500 sh (-22.57%)
Mason Hawkins 25,598,735 sh (-58.66%)
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Q3 2016

CHK Guru Trades in Q3 2016

Ray Dalio 367,600 sh (New)
Leon Cooperman 273,650 sh (New)
Paul Tudor Jones 70,852 sh (New)
Richard Snow 530,350 sh (New)
Caxton Associates 6,684,500 sh (New)
Louis Moore Bacon 286,173 sh (New)
David Dreman 24,186 sh (+591.03%)
Steven Cohen 5,248,400 sh (+561.17%)
Mason Hawkins 92,221,378 sh (+260.26%)
Arnold Schneider 5,155,330 sh (+47.44%)
John Griffin 12,629,879 sh (+46.86%)
Jeremy Grantham 145,347 sh (+3.42%)
Steven Cohen 3,986,500 sh (unchged)
Pioneer Investments Sold Out
Jim Simons Sold Out
Carl Icahn Sold Out
Charles Brandes 1,910,179 sh (-0.33%)
Murray Stahl 60,838 sh (-35.04%)
» More
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Preferred stocks of Chesapeake Energy Corp

SymbolPriceYieldDescription
CHKDG50.102.50
CHKVZ434.380.00
CHKDH72.380.00
CHKPRD42.902.624.50% Cumulative Convertible Preferred Stock
CHKDP605.002.375 3/4 % Pfd Shs
CHKDJ831.880.005 3/4 % Cum Non-Voting Conv Pfd Shs Reg-S
4GGB.Singapore0.000.005 3/4 % Conv Pfd Shs Series -A- -144A-
4GJB.Singapore0.000.005 3/4 % Cum Non-Voting Conv Pfd Shs Reg-S
CHKVP514.112.805 3/4 % Cum Conv Pfd Shs Series -A-
CKRGZ0.000.005 3/4 % Pfd Shs -144A
CHKWZ0.000.005 3/4 % Conv Pfd Shs Series -A- -144A-

Business Description

Industry: Oil & Gas - E&P » Oil & Gas E&P
Compare:OTCPK:KLYCY, NYSE:SWN, OTCPK:AETUF, NYSE:EGN, OTCPK:LNDNF, OTCPK:TRMLF, NYSE:CPG, NYSE:MUR, OTCPK:PREKF, NYSE:RICE, NYSE:VET, NYSE:WPX, NYSE:CNX, NYSE:NFG, NYSE:PE, OTCPK:PEYUF, OTCPK:OISHF, NYSE:AR, NAS:FANG, OTCPK:SVRGF » details
Traded in other countries:CHKE34.Brazil, CS1.Germany, CHK.Mexico,
Chesapeake Energy Corp is a natural gas and oil exploration and production company. It explores, develops and acquires properties for the production of natural gas and crude oil from underground reservoirs and also provides marketing & midstream services.

Chesapeake Energy Corp was incorporated in Oklahoma in 1989. The Company is a natural gas and oil exploration and production Company engaged in the exploration, development and acquisition of properties for the production of natural gas and crude oil from underground reservoirs and it provides marketing and midstream services. The Company operates in three segments which are managed separately because of the nature of its products and services. Its segments includes; exploration and production; marketing, gathering and compression; and oilfield services. The Company's exploration and production operating segment is responsible for finding and producing natural gas, oil and NGL; it's marketing, gathering and compression operating segment is responsible for marketing, gathering and compression of natural gas, oil and NGL; and its oilfield services operating segment is responsible for drilling, oilfield trucking, oilfield rentals, hydraulic fracturing and other oilfield services operations for both Chesapeake-operated wells and wells operated by third parties. The Company focuses its exploration, development, acquisition and production efforts in the two geographic operating divisions; Southern division and Northern Division. The Company's Southern Division includes the Eagle Ford Shale in South Texas, the Granite Wash/Hogshooter, Cleveland, Tonkawa and Mississippi Lime plays in the Anadarko Basin in northwestern Oklahoma, the Texas Panhandle and southern Kansas, the Haynesville/Bossier Shale in northwestern Louisiana and East Texas and the Barnett Shale in the Fort Worth Basin in north-central Texas. Its Northern Division includes the Utica Shale in Ohio, West Virginia and Pennsylvania, the Marcellus Shale in the northern Appalachian Basin in West Virginia and Pennsylvania and the Niobrara Shale in the Powder River Basin in Wyoming. It competes with both integrated and other independent natural gas and oil companies in acquiring desirable leasehold acreage, producing properties and the equipment and expertise necessary to explore, develop and operate its properties and market its production. The Company's exploration and production operations are subject to various types of regulation at the U.S. federal, state and local levels. Such regulation includes requirements for permits to drill and to conduct other operations and for provision of financial assurances covering drilling and well operations.

Guru Investment Theses on Chesapeake Energy Corp

Southeastern Asset Management Comments on Chesapeake - Oct 14, 2016

Chesapeake (NYSE:CHK) (+112%; +4.0%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the top contributor to performance during the quarter. Early in the year we swapped our equity position for near-term bonds and preferred stocks which offered equity-like returns and a shorter horizon for value recognition. As management delivered good results, the bonds approached par. Consequently, we sold all of the remaining bonds over the last three months. On the final day of the quarter, we exchanged all of our preferreds into equity at a price well below our appraisal. In the quarter, both operating expenses and capital expenditures continued to improve, additional debt was retired below face value, and management reduced distribution costs through restructuring agreements with Williams and selling the Barnett assets. The company is pursuing more cost improvements and increased its asset sale target for the year to $2 billion after surpassing the original $1 billion goal. Asset sales plus proceeds from the recent upsized term loan and convertible debt offering, which raised more capital at better terms than expected, should cover the company’s obligations for at least three years. We remain confident that CEO Doug Lawler and Chesapeake’s board will continue to successfully navigate the company through this lower-for-longer commodity price environment.



Southeastern Asset Management's Longleaf Partners third quarter 2016 commentary.



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Bill Nygren Comments on Chesapeake - Oct 12, 2016

Recall that earlier in 2016, we swapped most of our Chesapeake (NYSE:CHK) stock at approximately $4 per share for the company’s bonds at $48 per $100 par value, believing the bonds offered similar upside and less downside while capturing a tax loss. Last quarter we reported that the bonds had rallied to $85 per $100 par value, and the stock was trading at $4.28. Given the relative performance of the bonds to the stock and our comfort with the improved liquidity position of the company, we elected to swap back into the stock. Today our position in Chesapeake is exclusively in the form of equity.

From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund third quarter 2016 commentary.

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Bruce Berkowitz Comments on Chesapeake Energy - Aug 02, 2016

Short-duration bonds of Chesapeake Energy (NYSE:CHK), such as the 7.250% bonds maturing in 2018, were purchased at substantial discounts to par to yield double digit returns. Chesapeake is one of America’s largest producers of natural gas, oil, and natural gas liquids. The company’s assets span numerous U.S. shale basins. New management has navigated the cyclical downturn in oil and gas prices by cutting costs, raising liquidity, and reducing outstanding debt to the lowest level in the last nine years. Though we normally shy away from commodity price forecasting, data shows that natural gas markets have tightened due to waning production growth, expanding exports (to Mexico or via liquefied natural gas), and record domestic demand for electricity generation. Price forges its own anchor. While the company maintains an active hedging program to mitigate future commodity price fluctuations, small improvements in commodity prices can have a significantly positive impact on Chesapeake’s operating results. The company’s $4 billion revolving credit facility was recently reaffirmed and remains almost entirely untapped, which should provide flexibility for Chesapeake to renegotiate gas gathering contracts and shed additional assets to further reduce obligations.

From Bruce Berkowitz (Trades, Portfolio)'s first-half 2016 letter to shareholders.

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Southeastern Asset Management Comments on Chesapeake - Jul 14, 2016

As stated earlier, Chesapeake (NYSE:CHK) (+73%;+3.6%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the Fund’s largest contributor during the quarter. Earlier in the year, we swapped our equity for preferred stock and also added to our Chesapeake position via very discounted bonds and convertible bonds. This repositioning paid off in the quarter; the bonds appreciated more quickly than the stock as the company continued to lower its overall debt through purchases below par and debt for equity swaps. Additionally, in April, Chesapeake had its $4 billion revolving credit facility reaffirmed (90%+ untapped), with the next scheduled redetermination pushed out until June 2017. The company increased liquidity with the sale of about half of its mid-continent STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher Counties) acreage to Newfield at a fair price of over $400 million. In total, net debt has declined by over 10% or $1 billion in 2016. Management projects additional asset sales this year and continues to renegotiate pipeline commitments toward better rates. The company has put on hedges that help mitigate its downside. We remain confident that CEO Doug Lawler and Chesapeake’s board will successfully navigate the company through this particularly challenging commodity price environment.



From Longleaf Partners' second quarter 2016 fund commentary.



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Bill Nygren Comments on Chesapeake - Jul 11, 2016

Earlier in 2016, investors were pricing in significant bankruptcy risk across Chesapeake (NYSE:CHK)’s capital structure. At the time, we believed Chesapeake’s liquidity risks were manageable given the company’s ability to sell assets representing a small percentage of its future production in exchange for cash, making up a meaningful percentage of the company’s enterprise value. We felt that Chesapeake’s bonds at the time had a similar upside to the stock and had the added benefit of higher seniority in the capital structure, so we swapped the preponderance of our Chesapeake equity position into the company’s fixed income securities. On average over the months in which we executed this trade, we sold CHK stock for approximately $4 per share and bought bonds trading for $48.

Commodity prices rose during the quarter, while Chesapeake sold assets for cash without substantially reducing its current EBITDA. We believe that the liquidity profile of the company is now considerably improved. Today the bonds are trading for $85 while the stock is at $4.28, and the relative attractiveness of Chesapeake bonds to its stock has noticeably narrowed. We are very impressed with how well Chesapeake’s management team and board of directors have navigated this challenging commodity price environment, and we remain positive about the long-term prospects for this company.

From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund second quarter 2016 commentary.

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Brandes Investments Comments on Chesapeake - Jun 15, 2016

The uncertainty with Chesapeake (NYSE:CHK) is (and has been) the natural gas price. We believe that supply and demand warrant a much higher price than the current sub-$2 per mmBtu level (currently even lower in Pennsylvania where Chesapeake has a significant percentage of its acreage), likely in the $4-$6 range in the medium to long term. At the current natural gas price, producers are cutting capex significantly, which could ultimately impact the supply of natural gas. The path of natural gas prices is uncertain with a lag between capex cuts and changes to production levels. At higher long-term price levels we believe that Chesapeake’s enterprise value would be substantially more than what was valued by the market.



However, as Chesapeake built out its acreage, it utilized a significant amount of debt, making it one of the more leveraged oil and natural gas companies today. As a result, while we think it likely has access to liquidity to survive the depressed natural-gas price environment for the next year or two, we cannot rule out that the management and board will choose to preemptively file for reorganization under the bankruptcy code in order to restructure the company and reduce the substantial debt burden.



Therefore, the Global Large-Cap Investment Committee decided to sell Chesapeake equity, which bears the brunt of this bankruptcy timing risk, and allocate where possible to Chesapeake debt, which we believed offers a more attractive risk/reward tradeoff as it traded at 15 cents to 35 cents on the dollar. At these levels, the yield to maturity was north of 30%, offers the potential for equity-like returns and provides some downside protection because debt holders have a higher claim on assets than do equity shareholders if the company decides to file for reorganization.



It is not typical for the Global Equity Fund to hold securities other than common equity. Exceptions have been made when the securities within a company’s capital structure offered potential investment returns that rivaled those of common equity. This happened with the preferred equity securities of U.S. banks during the financial crisis, for instance. In this particular case, Chesapeake endured an extremely difficult commodity-price environment which resulted in the market value of its common equity, preferred equity and debt falling significantly. The investment committee believes that the potential return from investing in Chesapeake debt surpasses that of many other common equity investments.



If the company files for reorganization and emerges having restructured its debt, it is highly likely that some/all of the debt will be converted to equity, allowing us to potentially participate in the upside of the company’s enterprise value. The restructured company would allow for further potential recovery in value should natural-gas prices eventually rise to economically viable levels during or after the reorganization process.



From Brandes' Global Equity Fund first quarter 2016 commentary.



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Bill Nygren Comments on Chesapeake Energy - Apr 11, 2016

While there were no new companies purchased in the quarter, recent volatility in the equity and fixed income markets allowed us to purchase securities within the capital structure of two existing holdings in a way that maintained upside to these undervalued companies and added downside protection, while also providing a tax benefit. In the case of Chesapeake Energy (NYSE:CHK), we purchased bonds at prices that offered similar upside to the equity, despite higher seniority in the capital structure, while capturing a tax loss on the sale of equity.



From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund: First Quarter 2016 Commentary.

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Bill Nygren Comments on Chesapeake Energy - Apr 11, 2016

When a business doesn’t meet our expectations, we reduce our intrinsic value estimate accordingly, and the remaining three eliminations fall into that category. Selling our positions in American Express, Union Pacific and Chesapeake Energy allowed us to take tax losses while reinvesting proceeds into businesses in which we have more long-term confidence. Specifically, Chesapeake Energy (NYSE:CHK) has been a poor performer as oil prices have dropped from over $100 per barrel to less than $40 per barrel. Therefore, we swapped our Chesapeake holdings for other energy holdings that are also undervalued based on expected cost-cutting and higher commodity prices, but have what we believe are stronger balance sheets.



From Bill Nygren (Trades, Portfolio)'s Oakmark Fund: First Quarter 2016 Commentary.

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Longleaf Partners Comments on Chesapeake Energy - Jan 22, 2016

As noted, Chesapeake Energy (NYSE:CHK), the second largest producer of natural gas in the U.S., declined 39% in the quarter and 77% for the year, making it the largest detractor of performance in both periods. Options accounted for 40% of our position and slightly half of our return. Fears related to further declines in energy prices drove the stock lower, despite CEO Doug Lawler’s progress in areas he could control. After reaffirming the company’s untapped $4 billion revolving credit facility and renegotiating a deal with Williams (pipeline operator), in the fourth quarter Chesapeake turned to restructuring its debt. Chesapeake offered to exchange various unsecured debt securities at a discount to par for secured debt with a later maturity. Pushing out due dates coupled with reducing overall debt outstanding should help the company weather a sustained low energy price environment.



Over the year we adjusted our appraisal of Chesapeake to account for the tumble in oil and natural gas prices. Even with the depressed energy prices of today and little growth in that price as indicated by the futures strip pricing, the company’s non-producing assets have value that is not reflected at all in the stock price. Asset sale transactions in basins where Chesapeake operates helped validate our appraisal. We expect the company will continue to reduce costs while also seeking asset sales at fair prices. We are mindful of the risks associated with commodity companies. Once the debt restructuring was announced, we added to higher parts of the company’s capital structure that became particularly discounted.



During the quarter, Brad Martin assumed the role of non-executive Chairman of the Board from Archie Dunham, who became Chairman Emeritus. Martin has been a productive partner for Southeastern in other successful investments including Saks, Dillard’s and FedEx. We are confident that management, coupled with the board, can navigate the company through what has been and continues to be a severely challenging energy price environment.



From Longleaf Partners Fund 4th quarter commentary.



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Bill Nygren Comments on Chesapeake Energy - Jan 08, 2016

Our worst quarterly performer by far was Chesapeake Energy, down 39%, while only two other positions declined—FNF Group down 2% and Calpine down 1%. In our opinion, commodity prices have fallen to levels which, if permanent, would bankrupt much of the exploration and production sector of the oil and gas industry. However, we believe commodity prices will rise and that many investments made today in this industry will prove quite rewarding. That said, given Chesapeake (NYSE:CHK)’s financial obligations, it is without question a much riskier investment than we normally hold. Securities across Chesapeake’s capital structure have all declined sharply and, in our opinion, are now all attractively priced. We’ve shifted some of our position from common stock to somewhat less risky preferred stock, which we believe reduces risk without forfeiting upside potential.



From Oakmark Select Fund's fourth quarter 2015 commentary.



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Southeastern Asset Management Comments on Chesapeake Energy - Oct 22, 2015

One of the largest producers of natural gas, natural gas liquids, and oil in the U.S., Chesapeake Energy (NYSE:CHK) declined 34% in the quarter. In line with our exposure, about 60% of the impact came from the options we own and the remainder from the common equity. Concerns remain over the company’s liquidity profile, but management made major strides to improve realizations by successfully renegotiating two contracts with pipeline operator Williams that reduces transportation costs. Additionally, on October 1 the company announced the renewal of its $4 billion credit facility. Comparable asset sales in overlapping basins, such as Encana’s sale of Haynesville assets, further confirmed our appraisal of Chesapeake. The company’s shares remain more heavily discounted than its peers, yet CEO Doug Lawler is keenly focused on realizing value for shareholders even in this depressed energy price environment. Further reducing costs, including the recently announced 15% headcount reduction, coupled with asset divestitures, should lead to a stock price more in line with intrinsic value, which we appraise at twice the current price assuming the underlying commodity prices remain depressed.

From Mason Hawkins (Trades, Portfolio)' Longleaf Partners third quarter 2015 shareholder commentary.

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Bill Nygren Comments on Chesapeake - Oct 08, 2015

We wrote fairly extensively about Chesapeake (NYSE:CHK) last quarter, but an update seems warranted given the stock price’s continued weakness. In short, it wasn’t all bad news—lower oil and gas prices notwithstanding. Chesapeake renegotiated a meaningful component of its legacy high-cost transportation contracts (see last quarter’s letter for details), and this has reduced the company’s sensitivity to lower gas prices. Importantly, many of the company’s fundamentals, including production volume as well as drilling and operating costs, have been consistent with our expectations. Furthermore, one of Chesapeake’s competitors recently sold assets in the Haynesville Shale that were quite similar to those of Chesapeake; the sale price was consistent with our estimated value. At Oakmark, we always closely monitor private market transactions, which we believe are important indicators of business value.



From Biill Nygren's Q3 Oakmark Global Select Fund commentary.



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John Rogers Comments on Chesapeake Energy Corp. - Sep 03, 2015

Also, natural gas explorer Chesapeake Energy Corp. (NYSE:CHK) declined -20.65% as clouds continued to hang over the stock. The price of natural gas has declined nearly 40% over the past 12 months, and Chesapeake has become a favorite for short sellers as short interest has nearly quadrupled in just more than six months. Declines in prices for both natural gas and crude oil have brought increased scrutiny to Chesapeake debt level. We continue to own the stock.



From John Rogers (Trades, Portfolio)' Ariel Focus Fund second quarter 2015 commentary.



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Bill Nygren Comments on Chesapeake Energy Corp - Jul 09, 2015

Chesapeake Energy (CHK) has been a notably poor performer in 2015, down 42% since the start of the calendar year, and deserves further discussion. Every oil and gas producer has been hurt by the decline in commodity prices, but it has been particularly painful for Chesapeake. This is because Chesapeake has an unusually large fixed-cost base, which magnifies the impact falling revenue has on earnings. The outsized costs stem from onerous transportation contracts that require Chesapeake to pay a fixed-dollar amount to suppliers regardless of the volume of energy the company produces. Since a portion of these agreements cover assets that are not economical at today’s prices, Chesapeake’s high-return assets must now shoulder the full burden of these legacy costs as well as their own costs. At current commodity prices Chesapeake is losing money, and investors have become worried about the company’s liquidity.

We believe these issues are manageable, and we remain confident in the company’s ability to improve its earnings and liquidity. We believe Chesapeake’s huge scale will allow the company to sell a relatively small percentage of its future production in exchange for cash making up a relatively large percentage of the company’s current enterprise value. Such divestitures may take various forms (providing immediate cash, third party drilling capital, or simply reducing transportation burdens), but all would help resolve liquidity issues while also highlighting what we believe is the large disconnect between Chesapeake’s intrinsic value and its market price. Considering that Chesapeake’s Board of Directors looks at such decisions with the goal of maximizing value per share, we are comfortable that our investment is in good hands.

From Bill Nygren (Trades, Portfolio)'s Oakmark Select Fund Second Quarter 2015 Commentary.

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Mason Hawkins Comments on Chesapeake Energy Corp - May 28, 2015

The largest detractor in the quarter was Chesapeake Energy (CHK), one of the largest producers of natural gas, natural gas liquids, and oil in the U.S., which declined 27%. The company reported lower-than- expected price realizations and production in the fourth quarter. While the company cut 2015 budgeted capital expenditures (capex) over 40% versus 2014, the market was hoping for Chesapeake to balance lower cash flow with capex. The company maintains a flexible balance sheet, with $4 billion in cash and an additional $4 billion in an undrawn credit facility, which will allow CEO Doug Lawler to focus on driving the greatest value for shareholders for the long-term, either through the authorized $1 billion repurchase program, strategic acquisitions, or a combination of both. While our appraisal of the company has come down in the short-term with the collapse of oil and gas prices, the long-term thesis remains intact. Chesapeake’s second largest shareholder, Carl Icahn (Trades, Portfolio), recently increased his stake in Chesapeake by 10%, and Chairman Archie Dunham bought an additional $14 million at quarter-end. During the quarter we maintained our overall exposure to Chesapeake but switched half our position into options due to favorable pricing created by the panic and resulting volatility in energy markets. We also employed this approach to increase our exposure to Murphy. We viewed this as a rare opportunity to gain more downside protection while maintaining the upside benefit of higher stock prices. The Chesapeake options accounted for more than half of that position’s decline in the quarter.

From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q1 2015 Management Discussion.

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Mason Hawkins Comments on Chesapeake - Feb 11, 2015

Chesapeake (CHK) declined 21% for the full year and 14% in the fourth quarter. Since Chesapeake’s heavily vested Board took over in mid-2012, the company has delivered the balance sheet and improved production from its irreplaceable 12 +million net acres of oil and gas fields. CEO Doug Lawler is driving value recognition in ways he can control – selling assets at reasonable prices, reducing debt, and increasing operating efficiencies in both corporate and production activity. In the first half of the year, Chesapeake sold non-core acreage in Oklahoma, Texas, and Pennsylvania and spun-off its oilfield services business into Seventy-Seven Energy, which we sold. In the fourth quarter, Chesapeake closed the sale of Marcellus and Utica assets to Southwestern Energy for $5 billion. This amounted to roughly 8% of Chesapeake’s production for nearly half its market cap. Management announced plans to use $1 billion of the proceeds to repurchase the heavily discounted shares.

From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Fund Q4 2014 Management Discussion.

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Bill Nygren Comments on Chesapeake Energy - Jan 09, 2015

Chesapeake Energy (CHK - $19.57)

Chesapeake Energy is one of the largest oil and natural gas producers in the United States. The company has a storied history. Since its founding in 1989, it grew rapidly by acquiring acreage positions across North America’s largest resource plays. In our view, this growth left the company flush with high-quality assets, but financially overextended and operationally inefficient. During the past two years, the board of directors and the executive management team were replaced with new, shareholder-oriented leaders. This team began overhauling Chesapeake quickly by reducing leverage, simplifying the company’s financial structure and refocusing capital allocation on the highest return uses. In the past 18 months, Chesapeake has managed to spin off its non-core oilfield services business, sell billions of dollars of assets to reduce leverage, cut its capital spending budget by two-thirds and reduce general and administrative expenses by half. We believe these actions show that management’s focus has shifted away from acreage growth and toward maximizing shareholder returns. Chesapeake’s shares are trading at less than the company’s book value and at just 11x earnings per share. We see this as a bargain price for such high quality oil and gas assets run by what we believe is a strong, shareholder-friendly management team.



From Bill Nygren (Trades, Portfolio)'s Oakmark Fund – 4Q 2014 Letter.





Another way we seek to capture losses is to replace losing stocks with similar, but equally attractive, stocks. An example in the Oakmark Fund from this past quarter was selling our remaining Cenovus (CVE) shares and redeploying the proceeds into Chesapeake (CHK). We believe Cenovus is a fine, well-managed company, but due to rapidly declining oil prices, it had fallen beneath our purchase price. Another company we believed was also fine and well-managed, Chesapeake, had fallen to a price where it appeared to us to be more attractive than Cenovus. So even though Cenovus was far beneath our sell target, we captured the loss, increased our exposure to an energy sector we thought was cheap and switched to a stock we believed was somewhat more attractive.



From Bill Nygren's 4Q 2014 Market Commentary.



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Top Ranked Articles about Chesapeake Energy Corp

Southeastern Asset Management Comments on Chesapeake Guru stock highlight
Chesapeake (NYSE:CHK) (+112%; +4.0%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the top contributor to performance during the quarter. Early in the year we swapped our equity position for near-term bonds and preferred stocks which offered equity-like returns and a shorter horizon for value recognition. As management delivered good results, the bonds approached par. Consequently, we sold all of the remaining bonds over the last three months. On the final day of the quarter, we exchanged all of our preferreds into equity at a price well below our appraisal. In the quarter, both operating expenses and capital expenditures continued to improve, additional debt was retired below face value, and management reduced distribution costs through restructuring agreements with Williams and selling the Barnett assets. The company is pursuing more cost improvements and increased its asset sale target for the year to $2 billion after surpassing the original $1 billion goal. Asset sales plus proceeds from the recent upsized term loan and Read more...
Bill Nygren Comments on Chesapeake Guru stock highlight
Recall that earlier in 2016, we swapped most of our Chesapeake (NYSE:CHK) stock at approximately $4 per share for the company’s bonds at $48 per $100 par value, believing the bonds offered similar upside and less downside while capturing a tax loss. Last quarter we reported that the bonds had rallied to $85 per $100 par value, and the stock was trading at $4.28. Given the relative performance of the bonds to the stock and our comfort with the improved liquidity position of the company, we elected to swap back into the stock. Today our position in Chesapeake is exclusively in the form of equity. Read more...
Carl Icahn Gives Statement on Selling Chesapeake Energy at Loss Icahn cuts one of his several energy losers
Carl Icahn (Trades, Portfolio) gave up half his stake in Chesapeake Energy Corp. (NYSE:CHK) on Monday at a sizable loss. Read more...
Bruce Berkowitz Comments on Chesapeake Energy Guru stock highlight
Short-duration bonds of Chesapeake Energy (NYSE:CHK), such as the 7.250% bonds maturing in 2018, were purchased at substantial discounts to par to yield double digit returns. Chesapeake is one of America’s largest producers of natural gas, oil, and natural gas liquids. The company’s assets span numerous U.S. shale basins. New management has navigated the cyclical downturn in oil and gas prices by cutting costs, raising liquidity, and reducing outstanding debt to the lowest level in the last nine years. Though we normally shy away from commodity price forecasting, data shows that natural gas markets have tightened due to waning production growth, expanding exports (to Mexico or via liquefied natural gas), and record domestic demand for electricity generation. Price forges its own anchor. While the company maintains an active hedging program to mitigate future commodity price fluctuations, small improvements in commodity prices can have a significantly positive impact on Chesapeake’s operating results. The company’s $4 billion revolving credit facility was recently reaffirmed and remains almost entirely untapped, which should provide flexibility for Read more...
Southeastern Asset Management Comments on Chesapeake Guru stock highlight
As stated earlier, Chesapeake (NYSE:CHK) (+73%;+3.6%), one of the largest U.S. producers of natural gas, oil, and natural gas liquids, was the Fund’s largest contributor during the quarter. Earlier in the year, we swapped our equity for preferred stock and also added to our Chesapeake position via very discounted bonds and convertible bonds. This repositioning paid off in the quarter; the bonds appreciated more quickly than the stock as the company continued to lower its overall debt through purchases below par and debt for equity swaps. Additionally, in April, Chesapeake had its $4 billion revolving credit facility reaffirmed (90%+ untapped), with the next scheduled redetermination pushed out until June 2017. The company increased liquidity with the sale of about half of its mid-continent STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher Counties) acreage to Newfield at a fair price of over $400 million. In total, net debt has declined by over 10% or $1 billion in 2016. Management projects additional asset sales this year and continues to renegotiate pipeline commitments toward better rates. The company has put on hedges Read more...
Bill Nygren Comments on Chesapeake Guru stock highlight
Earlier in 2016, investors were pricing in significant bankruptcy risk across Chesapeake (NYSE:CHK)’s capital structure. At the time, we believed Chesapeake’s liquidity risks were manageable given the company’s ability to sell assets representing a small percentage of its future production in exchange for cash, making up a meaningful percentage of the company’s enterprise value. We felt that Chesapeake’s bonds at the time had a similar upside to the stock and had the added benefit of higher seniority in the capital structure, so we swapped the preponderance of our Chesapeake equity position into the company’s fixed income securities. On average over the months in which we executed this trade, we sold CHK stock for approximately $4 per share and bought bonds trading for $48. Read more...
Brandes Investments Comments on Chesapeake Guru stock highlight
The uncertainty with Chesapeake (NYSE:CHK) is (and has been) the natural gas price. We believe that supply and demand warrant a much higher price than the current sub-$2 per mmBtu level (currently even lower in Pennsylvania where Chesapeake has a significant percentage of its acreage), likely in the $4-$6 range in the medium to long term. At the current natural gas price, producers are cutting capex significantly, which could ultimately impact the supply of natural gas. The path of natural gas prices is uncertain with a lag between capex cuts and changes to production levels. At higher long-term price levels we believe that Chesapeake’s enterprise value would be substantially more than what was valued by the market. Read more...
Bill Nygren Comments on Chesapeake Energy Guru stock highlight
When a business doesn’t meet our expectations, we reduce our intrinsic value estimate accordingly, and the remaining three eliminations fall into that category. Selling our positions in American Express, Union Pacific and Chesapeake Energy allowed us to take tax losses while reinvesting proceeds into businesses in which we have more long-term confidence. Specifically, Chesapeake Energy (NYSE:CHK) has been a poor performer as oil prices have dropped from over $100 per barrel to less than $40 per barrel. Therefore, we swapped our Chesapeake holdings for other energy holdings that are also undervalued based on expected cost-cutting and higher commodity prices, but have what we believe are stronger balance sheets. Read more...
Bill Nygren Comments on Chesapeake Energy Guru stock highlight
While there were no new companies purchased in the quarter, recent volatility in the equity and fixed income markets allowed us to purchase securities within the capital structure of two existing holdings in a way that maintained upside to these undervalued companies and added downside protection, while also providing a tax benefit. In the case of Chesapeake Energy (NYSE:CHK), we purchased bonds at prices that offered similar upside to the equity, despite higher seniority in the capital structure, while capturing a tax loss on the sale of equity. Read more...

Ratios

vs
industry
vs
history
Forward P/E 8.20
CHK's Forward P/E is ranked higher than
86% of the 155 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 28.82 vs. CHK: 8.20 )
Ranked among companies with meaningful Forward P/E only.
N/A
P/S 0.60
CHK's P/S is ranked higher than
86% of the 546 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 3.24 vs. CHK: 0.60 )
Ranked among companies with meaningful P/S only.
CHK' s P/S Range Over the Past 10 Years
Min: 0.08  Med: 1.16 Max: 5.96
Current: 0.6
0.08
5.96
POCF 28.35
CHK's POCF is ranked lower than
88% of the 368 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 8.11 vs. CHK: 28.35 )
Ranked among companies with meaningful POCF only.
CHK' s POCF Range Over the Past 10 Years
Min: 0.85  Med: 3.31 Max: 29.88
Current: 28.35
0.85
29.88
EV-to-EBIT -3.06
CHK's EV-to-EBIT is ranked lower than
99.99% of the 152 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 14.51 vs. CHK: -3.06 )
Ranked among companies with meaningful EV-to-EBIT only.
CHK' s EV-to-EBIT Range Over the Past 10 Years
Min: -67.4  Med: 8 Max: 22.1
Current: -3.06
-67.4
22.1
EV-to-EBITDA -3.79
CHK's EV-to-EBITDA is ranked lower than
99.99% of the 266 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 14.83 vs. CHK: -3.79 )
Ranked among companies with meaningful EV-to-EBITDA only.
CHK' s EV-to-EBITDA Range Over the Past 10 Years
Min: -9.1  Med: 6.1 Max: 60.6
Current: -3.79
-9.1
60.6
Current Ratio 0.30
CHK's Current Ratio is ranked lower than
83% of the 507 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 1.27 vs. CHK: 0.30 )
Ranked among companies with meaningful Current Ratio only.
CHK' s Current Ratio Range Over the Past 10 Years
Min: 0.3  Med: 0.78 Max: 3.11
Current: 0.3
0.3
3.11
Quick Ratio 0.30
CHK's Quick Ratio is ranked lower than
82% of the 506 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 1.16 vs. CHK: 0.30 )
Ranked among companies with meaningful Quick Ratio only.
CHK' s Quick Ratio Range Over the Past 10 Years
Min: 0.3  Med: 0.77 Max: 3.05
Current: 0.3
0.3
3.05
Days Sales Outstanding 38.35
CHK's Days Sales Outstanding is ranked higher than
65% of the 392 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 47.95 vs. CHK: 38.35 )
Ranked among companies with meaningful Days Sales Outstanding only.
CHK' s Days Sales Outstanding Range Over the Past 10 Years
Min: 21.15  Med: 46.18 Max: 78.58
Current: 38.35
21.15
78.58
Days Payable 19.68
CHK's Days Payable is ranked lower than
80% of the 234 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 71.01 vs. CHK: 19.68 )
Ranked among companies with meaningful Days Payable only.
CHK' s Days Payable Range Over the Past 10 Years
Min: 19.68  Med: 119.75 Max: 446.82
Current: 19.68
19.68
446.82

Buy Back

vs
industry
vs
history
Dividend Growth (3y) -20.60
CHK's Dividend Growth (3y) is ranked lower than
52% of the 95 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -20.20 vs. CHK: -20.60 )
Ranked among companies with meaningful Dividend Growth (3y) only.
CHK' s Dividend Growth (3y) Range Over the Past 10 Years
Min: 0  Med: 4.5 Max: 48.1
Current: -20.6
0
48.1
Yield on cost (5-Year) 1.61
CHK's Yield on cost (5-Year) is ranked lower than
75% of the 408 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 3.20 vs. CHK: 1.61 )
Ranked among companies with meaningful Yield on cost (5-Year) only.
CHK' s Yield on cost (5-Year) Range Over the Past 10 Years
Min: 0.35  Med: 1.04 Max: 8.7
Current: 1.61
0.35
8.7

Valuation & Return

vs
industry
vs
history
Price/Median PS Value 0.51
CHK's Price/Median PS Value is ranked higher than
77% of the 471 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 1.00 vs. CHK: 0.51 )
Ranked among companies with meaningful Price/Median PS Value only.
CHK' s Price/Median PS Value Range Over the Past 10 Years
Min: 0.14  Med: 1.38 Max: 5.53
Current: 0.51
0.14
5.53
Earnings Yield (Greenblatt) (%) -32.70
CHK's Earnings Yield (Greenblatt) (%) is ranked lower than
86% of the 549 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -7.20 vs. CHK: -32.70 )
Ranked among companies with meaningful Earnings Yield (Greenblatt) (%) only.
CHK' s Earnings Yield (Greenblatt) (%) Range Over the Past 10 Years
Min: -32.7  Med: 9.1 Max: 16.6
Current: -32.7
-32.7
16.6
Forward Rate of Return (Yacktman) (%) -144.84
CHK's Forward Rate of Return (Yacktman) (%) is ranked lower than
91% of the 184 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -15.62 vs. CHK: -144.84 )
Ranked among companies with meaningful Forward Rate of Return (Yacktman) (%) only.
CHK' s Forward Rate of Return (Yacktman) (%) Range Over the Past 10 Years
Min: -144.84  Med: -31.2 Max: 22.2
Current: -144.84
-144.84
22.2

More Statistics

Revenue (TTM) (Mil) $8,500
EPS (TTM) $ -8.82
Beta2.12
Short Percentage of Float32.00%
52-Week Range $1.50 - 8.15
Shares Outstanding (Mil)887.39

Analyst Estimate

Dec16 Dec17 Dec18
Revenue (Mil $) 5,034 4,520 5,431
EPS ($) -0.28 1.07 1.79
EPS w/o NRI ($) -0.28 1.07 1.79
EPS Growth Rate
(3Y to 5Y Estimate)
N/A
Dividends Per Share ($)
» More Articles for CHK

Headlines

Articles On GuruFocus.com
Southeastern Asset Management Comments on Chesapeake Oct 14 2016 
Longleaf Partners 3rd Quarter Fund Commentary Oct 14 2016 
Bill Nygren Comments on Chesapeake Oct 12 2016 
Bill Nygren's Oakmark Select Fund 3rd Quarter 2016 Commentary Oct 12 2016 
Carl Icahn Clears More Oil Out of Portfolio With Transocean Sell Sep 29 2016 
Insider Trades of the Week: Facebook, Alphabet, Netflix Sep 23 2016 
Carl Icahn Gives Statement on Selling Chesapeake Energy at Loss Sep 20 2016 
Oil Prices Gain Slightly Sep 12 2016 
Oil Prices Gaining Aug 22 2016 
Bruce Berkowitz Comments on Chesapeake Energy Aug 02 2016 

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