CHK is the poster child for excess gone awry in the oil and gas space. It was the darling of the industry, until natural gas collapsed, leaving Aubrey McClellan’s acquisition strategy in tatters. The company was managed like a holding company, leveraging up the balance sheet to accumulate assets.
Unfortunately, the tide has turned in the commodity space and CHK’s late entry into the oil space has likely marked it for death.
I’ve always felt this stock would eventually go to zero. The bond market is suggesting there is something to worry about, with prices ranging in the 50’s to 70’s.
Quarterly reports are met with endless mark downs and losses.
And finally, its share price has collapsed to new lows, pushing debt/eq levels near 3–leaving the company fully exposed to the markets.
Should oil and gas remain at these levels or lower, I don’t see how CHK pulls through this in one piece.
Trading is fun. But sometimes people go about it without thinking. Just know, before you pull the trigger on that kick ass oil stock with the nice looking chart, something truly fucked up might be just beneath the surface, in the fundamentals.
Smart people look at all of the evidence, before making a determination. Don’t pigeon hole yourself as a chart guy, or a fundy guy, just because it’s in your comfort zone.
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Your restraint in these markets is enough to give me a chill.
I own KMI and I’ve been selling calls and buying puts (not quite as much as I would have liked!) Until I’m convinced these suckers will survive this commodity credit crisis.
Merci.