Date post: | 12-Apr-2017 |
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Economy & Finance |
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These Energy Stocks Got Annihilated This Week
Despite Friday's big rally, the price of oil slumped below $30 a barrel this week causing a steep drop in energy stocks.
Companies with weak balance sheets were hit particularly hard, with a number of energy stocks plunging more than 30% this week. Leading the way, according to S&P Capital IQ data,
were Chesapeake Energy (NYSE: CHK), NGL Energy Partners (NYSE: NGL), California Resources (NYSE: CRC), Unit Corp (NYSE: UNT), and Teekay Offshore
Partners (NYSE: TOO).
What:Teekay Offshore Partners (NYSE: TOO) dropped 34% this week.
So What: Key driver: An unexpected
contract termination Due to weak oil prices,
Repsol has decided to close down the Varg oil deposit in the North Sea because it has been cash flow negative since last August
Now What: Because of that, it is terminating
its contract with Teekay Offshore for the field’s floating production vessel, which will leave the area later this summer
Key takeaway: With oil companies starting to shut down unprofitable fields, it has investors worries that more contract cancelations could be on the way
What:
Unit Corp (NYSE: UNT) slumped 35% this week.
So What: Key driver: Plunging oil prices Unit is a diversified energy
company with not only exploration and production assets, but drilling and midstream assets
Despite that diversification, all three segments are under pressure due to weakening commodity prices
Now What: Not only have weak oil prices
impacted cash flow at its production business, but those weak prices have crimped demand for its drilling rigs and cut into the margins it earns on volumes from its commodity-based midstream contracts
Key takeaway: In other words, all three of segments are growing weaker along with the price of oil
What:NGL Energy Partners (NASDAQ: CPLP) slumped 39% this week.
So What: Key driver: A weak
earnings report and watered down guidance
NGL Energy Partners reported adjusted EBITDA of $113.5 million, which was well below the $144.8 million it earned in the year-ago quarter
Now What: Because of the impact weak oil prices
are having on the hydrocarbons recovered from its water solutions business, the company is watering down its guidance
NGL Energy Partners now expects full-year EBITDA to be $450 million, which is down from its previous guidance of $500 million
Key takeaway: Investors don’t like when companies water down their guidance
What:California Resources (NYSE: CRC) fell more than 41% this week.
So What: Key driver: Plunging oil prices
caused investors to bail on the company’s bonds and its stock
On Thursday California Resources stock inexplicably plunged more than 25%
That day its bonds were the most actively traded in the market, with its 8% senior unsecured notes due in 2022 slumping 3% to just $0.19 on the dollar.
Now What: That sell-off in the bond
market made equity investors worried that its credit was deteriorating
Key takeaway: Investors are starting to give up all hope that this company makes it through the downturn without having to restructure in bankruptcy
What:Chesapeake Energy (NYSE: CHK) plunged 43% this week.
So What: Key driver: Bankruptcy fears Chesapeake Energy’s stock
crashed on Monday on a report that the company had hired attorneys for restructuring
That report was subsequently denied by the company, saying it "has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders"
Now What: Analysts and investors aren’t so
sure the company will make it through the downturn without restructuring
UBS reiterated its sell rating while slashing its price target from $2 to $0.50 per share
Key takeaway: It doesn’t look good for Chesapeake Energy
This could be the next billion-dollar iSecret