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Also traded in: 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 : 3/10

vs
industry
vs
history
Equity to Asset 0.09
CHK's Equity to Asset is ranked lower than
83% of the 443 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 0.49 vs. CHK: 0.09 )
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: 0.09
-0.33
0.56
F-Score: 2
Z-Score: -3.62
M-Score: -6.14
WACC vs ROIC
4.87%
-75.44%
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 : 6/10

vs
industry
vs
history
Operating margin (%) -124.04
CHK's Operating margin (%) is ranked lower than
62% of the 448 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -64.98 vs. CHK: -124.04 )
Ranked among companies with meaningful Operating margin (%) only.
CHK' s Operating margin (%) Range Over the Past 10 Years
Min: -148.22  Med: 14.55 Max: 46.59
Current: -124.04
-148.22
46.59
Net-margin (%) -99.24
CHK's Net-margin (%) is ranked lower than
56% of the 448 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -72.01 vs. CHK: -99.24 )
Ranked among companies with meaningful Net-margin (%) only.
CHK' s Net-margin (%) Range Over the Past 10 Years
Min: -115.05  Med: 7.69 Max: 27.35
Current: -99.24
-115.05
27.35
ROE (%) -202.20
CHK's ROE (%) is ranked lower than
91% of the 456 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -22.67 vs. CHK: -202.20 )
Ranked among companies with meaningful ROE (%) only.
CHK' s ROE (%) Range Over the Past 10 Years
Min: -156.04  Med: 6.01 Max: 21.85
Current: -202.2
-156.04
21.85
ROA (%) -50.72
CHK's ROA (%) is ranked lower than
81% of the 505 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -12.82 vs. CHK: -50.72 )
Ranked among companies with meaningful ROA (%) only.
CHK' s ROA (%) Range Over the Past 10 Years
Min: -50.54  Med: 3.25 Max: 9.88
Current: -50.72
-50.54
9.88
ROC (Joel Greenblatt) (%) -75.60
CHK's ROC (Joel Greenblatt) (%) is ranked lower than
77% of the 488 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -22.13 vs. CHK: -75.60 )
Ranked among companies with meaningful ROC (Joel Greenblatt) (%) only.
CHK' s ROC (Joel Greenblatt) (%) Range Over the Past 10 Years
Min: -80.24  Med: 6.68 Max: 19.58
Current: -75.6
-80.24
19.58
Revenue Growth (3Y)(%) 0.20
CHK's Revenue Growth (3Y)(%) is ranked higher than
63% of the 377 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -7.50 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: 15.00 Max: 38.6
Current: 0.2
-10.2
38.6
EPS Growth (3Y)(%) 148.60
CHK's EPS Growth (3Y)(%) is ranked higher than
96% of the 271 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 0.60 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: -0.50 Max: 148.6
Current: 148.6
-46.6
148.6
» CHK's 10-Y Financials

Financials (Next Earnings Date: Est. 2016-08-05)


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

» Details

Guru Trades

Q2 2015

CHK Guru Trades in Q2 2015

Murray Stahl 78,151 sh (+30.31%)
Arnold Schneider 3,147,857 sh (+27.03%)
John Rogers 277,130 sh (+25.52%)
Paul Tudor Jones 32,200 sh (+21.51%)
Richard Snow 4,134,360 sh (+11.13%)
Charles Brandes 10,228,072 sh (+5.38%)
John Buckingham 111,565 sh (+0.66%)
Bill Nygren 12,000,000 sh (unchged)
George Soros 1,900,000 sh (unchged)
Carl Icahn 73,050,000 sh (unchged)
Joel Greenblatt Sold Out
Mason Hawkins 60,488,573 sh (-5.78%)
David Dreman 27,193 sh (-27.88%)
Ray Dalio 162,000 sh (-63.87%)
Steven Cohen 480,700 sh (-72.50%)
» More
Q3 2015

CHK Guru Trades in Q3 2015

Jeremy Grantham 83,500 sh (New)
Andreas Halvorsen 1,940,852 sh (New)
Ray Dalio 188,600 sh (+16.42%)
Charles Brandes 11,728,300 sh (+14.67%)
Murray Stahl 88,092 sh (+12.72%)
George Soros 3,500,000 sh (unchged)
Carl Icahn 73,050,000 sh (unchged)
Bill Nygren 12,000,000 sh (unchged)
Steven Cohen Sold Out
Paul Tudor Jones Sold Out
John Rogers 267,555 sh (-3.46%)
Mason Hawkins 57,905,526 sh (-4.27%)
John Buckingham 106,677 sh (-4.38%)
David Dreman 25,490 sh (-6.26%)
Arnold Schneider 2,352,259 sh (-25.27%)
Richard Snow 432,347 sh (-89.54%)
» More
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)
Bill Nygren 12,000,000 sh (unchged)
Carl Icahn 73,050,000 sh (unchged)
David Dreman Sold Out
Andreas Halvorsen Sold Out
John Buckingham 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)
Richard Snow Sold Out
Ray Dalio Sold Out
Bill Nygren 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
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Preferred stocks of Chesapeake Energy Corp

SymbolPriceYieldDescription
CHKDG25.0010.00
CHKVZ434.380.00
CHKDH72.380.00
CHKPRD23.5914.314.50% Cumulative Convertible Preferred Stock
CHKDP279.4510.295 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
CHKVP267.0010.775 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:TUWOY, NYSE:BSM, OTCPK:MAGH, NYSE:CNX, NAS:PDCE, NYSE:RICE, NYSE:WPX, OTCPK:DRAGY, NYSE:VET, NYSE:WLL, OTCPK:SPGYF, NYSE:LPI, OTCPK:DETNF, NAS:CRZO, NAS:GPOR, NYSE:KOS, NYSE:MTDR, OTCPK:AVOGF, NYSE:SM, OTCPK:PEYUF » details
Traded in other countries: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

John Rogers Comments on Chesapeake Energy Corp - Jun 27, 2016

Also, natural gas explorer Chesapeake Energy Corporation (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)' Focus 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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Mason Hawkins Comments on Chesapeake - Oct 20, 2014

Our appraisals of our three energy-related holdings did not fall in spite of large stock declines, because our models already incorporated lower commodity prices based on the futures curve pricing and the marginal cost of production in our various plays. Chesapeake (CHK) fell 20% in the quarter. While costs declined, capex remained on plan, and the company moved production estimates up slightly. During the two year tenure of the new board, balance sheet leverage has been reduced by $6 billion, primarily from noncore asset sales. CEO Doug Lawler is driving value recognition in ways he can control and is building additional upside with the $2–3 billion of annual discretionary capital spending that management projects should deliver strong returns on capital, even without higher commodity prices. The company’s 4.8 million net developed acres and 7.5 million undeveloped acres of oil and gas fields cannot be replicated.

From Mason Hawkins (Trades, Portfolio)’ Longleaf Partners Q3 2014 Management Discussion.

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Longleaf Partners Fund Comments on Chesapeake - Jul 24, 2014

The biggest performance drivers in the quarter were among the companies that contributed most to YTD gains. Chesapeake (CHK), the U.S. oil and gas exploration and production company, rose 22% in the quarter and was up 15% YTD. During the quarter, the company announced better-than-expected production and realizations and raised yearly guidance on both of these metrics. Management continued to execute on the capital efficiency strategy, highlighted by the spin-off at quarter-end of its oilfield services business into a publicly traded company called Seventy Seven Energy. The spin-off eliminated approximately $1.5 billion of net debt from Chesapeake’s balance sheet. Divestitures of noncore acreage in Oklahoma, Texas, and Pennsylvania were also completed. Our CEO partner, Doug Lawler, is positioning the company to focus on its strong assets in the Eagle Ford, Marcellus and Utica plays, while growing production profitably and keeping capital expenditures within cash flow.

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

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Top Ranked Articles about Chesapeake Energy Corp

John Rogers Comments on Chesapeake Energy Corp Guru stock highlight
Also, natural gas explorer Chesapeake Energy Corporation (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. 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...
Longleaf Partners Comments on Chesapeake Energy Guru stock highlight
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. Read more...
Bill Nygren Comments on Chesapeake Energy Guru stock highlight
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. Read more...
The Stocks in Mason Hawkins' 'Crash Bucket' Managers expect the group to form a large part of their future return
In Southeastern Asset Management’s third quarter letter, managers discussed three categories of their holdings, the third of which they dubbed a “crash bucket.” Stocks in this elite group consisted of their energy holdings, which as a group had declined more than 60% year to date. Read more...
Southeastern Asset Management Comments on Chesapeake Energy Guru stock highlight
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 Read more...
Bill Nygren Comments on Chesapeake Guru stock highlight
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. Read more...
John Rogers Comments on Chesapeake Energy Corp. Guru stock highlight
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. Read more...

Ratios

vs
industry
vs
history
P/S 0.25
CHK's P/S is ranked higher than
92% of the 417 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 2.19 vs. CHK: 0.25 )
Ranked among companies with meaningful P/S only.
CHK' s P/S Range Over the Past 10 Years
Min: 0.08  Med: 1.38 Max: 5.96
Current: 0.25
0.08
5.96
PFCF 3.26
CHK's PFCF is ranked higher than
76% of the 119 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 12.01 vs. CHK: 3.26 )
Ranked among companies with meaningful PFCF only.
CHK' s PFCF Range Over the Past 10 Years
Min: 1.89  Med: 5.80 Max: 29.98
Current: 3.26
1.89
29.98
POCF 7.21
CHK's POCF is ranked lower than
58% of the 289 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 5.50 vs. CHK: 7.21 )
Ranked among companies with meaningful POCF only.
CHK' s POCF Range Over the Past 10 Years
Min: 0.85  Med: 3.31 Max: 11.57
Current: 7.21
0.85
11.57
EV-to-EBIT -1.14
CHK's EV-to-EBIT is ranked lower than
99.99% of the 126 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 12.36 vs. CHK: -1.14 )
Ranked among companies with meaningful EV-to-EBIT only.
CHK' s EV-to-EBIT Range Over the Past 10 Years
Min: -67.4  Med: 8.25 Max: 22.1
Current: -1.14
-67.4
22.1
EV-to-EBITDA -1.31
CHK's EV-to-EBITDA is ranked lower than
99.99% of the 196 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 9999.00 vs. CHK: -1.31 )
Ranked among companies with meaningful EV-to-EBITDA only.
CHK' s EV-to-EBITDA Range Over the Past 10 Years
Min: -9.1  Med: 6.30 Max: 60.6
Current: -1.31
-9.1
60.6
Current Ratio 0.53
CHK's Current Ratio is ranked lower than
77% of the 489 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 1.36 vs. CHK: 0.53 )
Ranked among companies with meaningful Current Ratio only.
CHK' s Current Ratio Range Over the Past 10 Years
Min: 0.44  Med: 0.79 Max: 3.11
Current: 0.53
0.44
3.11
Quick Ratio 0.53
CHK's Quick Ratio is ranked lower than
76% of the 489 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 1.32 vs. CHK: 0.53 )
Ranked among companies with meaningful Quick Ratio only.
CHK' s Quick Ratio Range Over the Past 10 Years
Min: 0.41  Med: 0.78 Max: 3.05
Current: 0.53
0.41
3.05
Days Sales Outstanding 28.60
CHK's Days Sales Outstanding is ranked higher than
70% of the 398 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 39.16 vs. CHK: 28.60 )
Ranked among companies with meaningful Days Sales Outstanding only.
CHK' s Days Sales Outstanding Range Over the Past 10 Years
Min: 19.9  Med: 46.18 Max: 78.58
Current: 28.6
19.9
78.58
Days Payable 26.35
CHK's Days Payable is ranked lower than
78% of the 260 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 75.15 vs. CHK: 26.35 )
Ranked among companies with meaningful Days Payable only.
CHK' s Days Payable Range Over the Past 10 Years
Min: 33.15  Med: 140.29 Max: 299.83
Current: 26.35
33.15
299.83

Valuation & Return

vs
industry
vs
history
Price/Median PS Value 0.17
CHK's Price/Median PS Value is ranked higher than
87% of the 379 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: 0.70 vs. CHK: 0.17 )
Ranked among companies with meaningful Price/Median PS Value only.
CHK' s Price/Median PS Value Range Over the Past 10 Years
Min: 0.16  Med: 1.19 Max: 7.23
Current: 0.17
0.16
7.23
Earnings Yield (Greenblatt) (%) -88.20
CHK's Earnings Yield (Greenblatt) (%) is ranked lower than
83% of the 500 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -12.50 vs. CHK: -88.20 )
Ranked among companies with meaningful Earnings Yield (Greenblatt) (%) only.
CHK' s Earnings Yield (Greenblatt) (%) Range Over the Past 10 Years
Min: -88.2  Med: 8.90 Max: 16.6
Current: -88.2
-88.2
16.6
Forward Rate of Return (Yacktman) (%) -167.42
CHK's Forward Rate of Return (Yacktman) (%) is ranked lower than
94% of the 172 Companies
in the Global Oil & Gas E&P industry.

( Industry Median: -14.15 vs. CHK: -167.42 )
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: -76.1  Med: -29.10 Max: 41.2
Current: -167.42
-76.1
41.2

More Statistics

Revenue (TTM) (Mil) $11,957
EPS (TTM) $ -18.15
Beta1.86
Short Percentage of Float24.01%
52-Week Range $1.50 - 11.90
Shares Outstanding (Mil)684.61

Analyst Estimate

Dec16 Dec17 Dec18
Revenue (Mil $) 3,717 4,263 5,040
EPS ($) -0.52 0.61 1.10
EPS w/o NRI ($) -0.52 0.61 1.10
EPS Growth Rate
(3Y to 5Y Estimate)
7.65%
» More Articles for CHK

Headlines

Articles On GuruFocus.com
John Rogers Comments on Chesapeake Energy Corp Jun 27 2016 
Oil Update: Are Bargains Still Out There? - Harris Associates Jun 20 2016 
Brandes Investments Comments on Chesapeake Jun 15 2016 
Brandes Global Equity Fund 1st Quarter Commentary Jun 15 2016 
Bill Nygren Gets Better Than Fair Value for 3 Stakes May 29 2016 
Charles Brandes Trims Stake in South American Petroleum Company May 13 2016 
Bullish on Chesapeake Energy After RCF Amendment Apr 12 2016 
Bill Nygren Sells General Mills, American Express, Chesapeake Energy in Q1 Apr 11 2016 
Bill Nygren Comments on Chesapeake Energy Apr 11 2016 
Bill Nygren Comments on Chesapeake Energy Apr 11 2016 

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