All seems well right now for CHK stock, which, last year, plunged dangerously. To be sure, Chesapeake Energy Corporation (NYSE:CHK) shares lost 47% of their value when the price of crude oil tanked. However, CHK opened the year on a high and is up a whopping 60% so far in 2019.
So what is the reason? Let’s make a quick analysis.
Chesapeake Energy Made a Series of Bad Moves Last Year
Interestingly, 2018 is a year the management at Chesapeake might want to forget, given the wild price movement. The firm faced strong headwinds due to a few key decisions it made and also due to the fluctuation of oil prices at the lower end. Notably, the firm seemed to rub the wrong side of investors when it acquired WildHorse Resource Development.
CHK stock investors thought the investment into WildHorse was needlessly pricey and that it diluted their stake. The company’s management, on the other hand, believed the acquisition would go a long way into boosting the firm’s bottom line.
Following the Price of Oil
Another issue that led to the downward movement of CHK stock was the highly volatile crude oil prices. In the six months leading up to March this year, the West Texas Intermediate (WTI) was in a pendulum swing between a peak of $75 per barrel and a drop around $40.
Nonetheless, the oil industry seems to be on a roll this year. Notably, the price of WTI hit $63.45 a barrel early Monday. On the other hand, international benchmark futures for Brent Crude gained 38 cents and settled at $70.72 a barrel. Both WTI and Brent were last at such levels in November 2018.
CHK stock’s surge appears to be a result of strong jobs data from the US, and a tight supply of oil from the OPEC bloc. In addition, the ongoing sanctions on Venezuela and Iran have ensured that demand for oil is higher than its supply. Given this dynamic, it will be interesting to watch how CHK stock will behave going forward, as it is clear that its price tracks that of oil.
Featured image: DepositPhotos @ bashta