5 Oil Stocks That May Not Survive the Current Crisis - 2 of 5

#2 - Chesapeake Energy (OTCMKTS:CHKAQ)

Chesapeake Energy (NYSE:CHK) stock was troubled since last year. However, there were many investors that believed the CHK stock was priced so low it couldn’t help but go up. But then oil stocks got hit by the double whammy of the coronavirus and the pricing war between Russia and Saudi Arabia.

To be fair, falling oil prices due to the novel coronavirus are a major factor to the misfortune of CHK stock. And even blue-chip energy companies such as Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) are trading at three-year and ten-year lows respectively.

But Chesapeake Energy had problems before the virus. And those problems are only being magnified by the falling oil prices. A very real and pressing concern will be the cost of servicing an increasing debt level.

Chesapeake has engaged in a reverse stock split. The company is also tapping into a $3 billion credit facility, and they have announced a plan to sell off assets. All of this has the sound of a company that’s playing defense. Because while this is a move they had to make, it will put the company under financial pressure with revenue certain to decline.

But here may be the most difficult math to work through. At the end of 2019, Chesapeake had $8.9 billion of outstanding debt. The company had just under $8.6 billion in total revenue. Now consider that over the next five years, the company will have to retire $4.9 billion of debt with interest payments. This just doesn’t seem like a story that ends well for CHK stock.

About Chesapeake Energy

Current Price

$3.05

Consensus Rating

N/A

Ratings Breakdown

0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.

Consensus Price Target

N/A