Penny Stocks: Is Chesapeake Energy Showing Buy Signals?

Penny Stocks

Chesapeake Energy (NYSE:CHK) is an energy sector favorite. This penny stock is selling for $2.84 USD, up 3.37% at the time of writing.

There’s every chance that Chesapeake will climb again in 2019; energy stocks move in tandem with natural gas and oil prices, and if these prices climb again, you can bet CHK will too.

Penny Stocks in Gas

It’s simple really, Chesapeake Energy is an Oklahoma-based petroleum and natural gas exploration and production company. It stands to reason that investors will put their faith behind this company if the sector it moves in begins climbing again.

2018 was Good, Then Bad

In the middle of 2018, this penny stock skyrocketed after the company announced it would sell assets in the Utica Shale for $2 billion. Selling the assets would mean an overall improved EBITDA because it would lower gathering, processing, and transport costs by over $400 million. Investors were delighted. 

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At the time, Chesapeake’s market cap was ball-parking $4 billion USD, so this deal was no minor decision. An increase in capital along with lower operation costs sounded like a sweet deal to investors.

It also helped that around the same time, energy prices were high. The result of both of these occurrences was that the CHK penny stock soared over $5 per share.

The Problem with Gas and Oil is…

But considering this penny stock has a current price tag of $2.84, it doesn’t take a scientist to note that CHK almost halved in value since those good days in 2018. Yes, in the latter half of 2018, the energy sector was hit particularly hard as the price of oil plummeted due to over-production concerns.

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Supply was outpacing demand and so the price of oil fell to as low as $42 USD per barrel. The crash began in October, and the CHK penny stock crashed down with it. 

The Bottom Line

The issue investors must contend with is how dependent CHK stock is on the fundamentals of oil and gas prices. What’s bullish for natural gas is bullish for Chesapeake Energy. Unfortunately, that goes the other way too.

But now rising energy prices are causing a rally in the sector and the penny stock is climbing again. The US/China trade war and OPEC production concerns have boosted oil and natural gas prices again. So will the climb remain? Should we be bullish about Chesapeake Energy?

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