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Chesapeake Stock Price Dip Below $1 After Issuing Going Concern Warning

Chesapeake Energy

Chesapeake (NYSE: CHK) stock price tumbled below $1 after posting bigger than expected loss for the third quarter. In addition, the company has also issued a warning that they might not be able to continue if oil and gas prices persist at the current level.

Chesapeake stock price is currently trading around $0.90. The shares plunged more than 29% in a single day. The shares are down 50% in the past six months. The company has also been struggling to generate enough cash for business operations, capital investments, and debt repayments.

CHK Chesapeake Energy Corporation daily Stock Chart

Q3 Loss Impacted Chesapeake Stock Price

Chesapeake Energy has reported a significant decline in third-quarter revenue. The company has also experienced a drop in Q3 production to 478K boe/day. This represents a decline of 11% Y/Y.

CHK’s realized oil prices stood around $60.66/bbl in Q3, while natural gas prices fell to $2.38/Mcf. Consequently, its revenue plunged more than 3% from the previous year’s quarter.

On top, the company’s adjusted net loss came in at $188 million, or $0.11 per share. The company has been struggling with a massive amount of debt load. Chesapeake’s debt outstanding inclusive of Brazos Valley stands around $9.732 billion at present. Unfortunately, it is not in a position to generate enough cash to repay the debt.

Going Concern Warning Added to Bearish Trend

Chesapeake Energy indicated that they might not be able to continue as a going concern if oil and gas prices persist at the current level.

CHK warns “If continued depressed prices persist, combined with the scheduled reductions in the leverage ratio covenant, our ability to comply with the leverage ratio covenant during the next 12 months will be adversely affected which raises substantial doubt about our ability to continue as a going concern.

Chesapeake Stock Price Dip...

The company is planning to significantly reduce its cost structure and capital investments to improve its cash position. Overall, future fundamentals are looking bleak for Chesapeake stock price. This is because oil and gas prices have limited upside potential considering demand and supply dynamics.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.