The natural gas sector has had a fairly impressive year so far but the same cannot be said about Chesapeake Energy Corporation (NYSE:CHK). The company has gone through its fair share of troubles, and CHK stock has crashed by as much as 70% in 2019 so far.
Working on Key Strategy
The continued uncertainty around the oil and gas markets has also been a source of heartburn for the company. Moreover, Chesapeake’s massive debt burden has also made matters difficult. However, in the conference call for its third-quarter earnings, the company stated that it is going to shift its strategy considerably in 2020 in order to engineer a turnaround.
Chesapeake Energy has stated that due to the weakness in oil and gas prices, it will need to revise its spending plans for 2020. In the second quarter, the company had earmarked its spending to be in the $2.1 billion to $2.3 billion range, but now it has revised its spending targets to the $1.3 billion to $1.6 billion range.
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The Chief Executive Officer, Doug Lawler, also said that the company is going to allocate the majority of its spending budget towards the high margin assets. However, the one silver lining from this development is the fact that the company will be able to generate cash flow.
CHK stock closed at $0.62 on Wednesday.
Mounting Debts
The other major concern for Chesapeake Energy is the mountain of debt that it will have to manage in the middle of uncertain market conditions. The company’s decision to reduce spending in 2020 is clearly an attempt to manage this, and it is also exploring other options in order to free up more cash. The CFO of Chesapeake, Nick Dell’Osso, stated that the company would be closely working with its bank group and also impose cost discipline through a range of measures.
Some of those measures include asset sells and price hedging, among others. While the measures are welcome, there could be more volatility next year.
What do you think about the future of CHK stock?
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