Commodity Stock to watch: Chesapeake Energy Corporation (NYSE: CHK)

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Chesapeake Energy Corporation (NYSE: CHK) stock fell over 3.2% in the pre-market session of September 10th, 2019 (as of  8:33 am GMT-4 ; Source: Google finance) after the company signed a privately negotiated agreement to issue a total of 250.7 million shares of common stock in exchange for senior notes and convertible preferred stock. The common stock issuance represents 15.3% of the 1.63 billion shares outstanding as of July 31. The stock will be exchanged for $40 million in 5.75% convertible preferred stock, $112.7 million in 4.875% senior notes due 2022, $129.3 million in 5.75% senior notes due 2023, $155.8 million in 5.5% convertible senior notes due 2026 and $150 million in 8.0% senior notes due 2027.

On the other hand, for the 2019 second quarter, Chesapeake reported net income of $98 million and net income available to common stockholders of $75 million, or $0.05 per diluted share.  The 2019 second quarter adjusted net loss attributable to Chesapeake was $158 million or $0.10 per share while adjusted EBITDAX was $612 million. The average daily production for the 2019 second quarter was approximately 496,000 boe and consisted of approximately 122,000 bbls of oil, 2.034 billion cubic feet (bcf) of natural gas and 35,000 bbls of natural gas liquids (NGL). Average daily production for the 2018 second quarter was approximately 530,000 boe and consisted of approximately 90,000 bbls of oil, 2.311 bcf of natural gas and 55,000 bbls of NGL. Oil production represented approximately 25% of the company’s 2019 second quarter aggregate production compared to 17% in the 2018 second quarter. Despite lower average prices for our oil, natural gas and NGL sold, Chesapeake’s cash margins increased significantly in the 2019 second quarter compared to the 2018 second quarter, primarily due to a higher oil production mix and a decrease in GP&T and general and administrative expenses. Chesapeake reduced its cash operating expenses on an absolute basis by $57 million, or approximately $0.40 per boe.

Moreover, Chesapeake invested total capital expenditures of approximately $559 million during the 2019 second quarter, including capitalized interest of $6 million, compared to approximately $530 million in the 2018 second quarter. As of June 30, 2019, Chesapeake’s principal amount of debt outstanding inclusive of Brazos Valley debt was approximately $10.161 billion, compared to $8.168 billion as of December 31, 2018. The increase in debt outstanding was largely a result of $1.375 billion in debt assumed by Chesapeake and the $353 million of net cash consideration paid as part of the WildHorse acquisition on February 1, 2019.

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