Are Chesapeake Energy and Southwestern Energy Impacted by the Fed’s Rate Increase?

Chesapeake Energy and Southwestern Energy are two stocks that are favorites for many investors, both expecting increases in revenues over the next 12 months. Despite the positive outlooks from investors, both stocks dropped after the Federal Reserve announced its interest rate hike, a point where the general market began to recover from its opening losses. Whether management issues are contributory factors to the decline remains to be seen.

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Chesapeake Energy Corporation    

Southwestern Energy Company                      

Chesapeake Energy fell 16 cents a share on Friday to close at $5.29 a share. The stock has a generally positive rating from investment rating firms, with a majority recommending “hold” though this is a qualified hold. Notably, Chesapeake was the first company to use fracking to drill for natural gas reserves, but the plunge in natural gas prices paralleled the company’s declining investment in fracking. The company’s founder, Aubrey McClendon, died one year ago and the company continues to search for a direction. Despite the downturns, insider and regular buying of the stock continues. Chesapeake has reported a net loss of $6.45 a share on revenue of $7.9 billion for the year 2016 as compared to loss of $22.43 a share on revenue of $12.8 billion reported for the year 2015. The company currently has about $13 billion in assets but almost $10 billion in debt and it expects higher capex spending in the year 2017 reflecting management’s confidence in achieving free cash flow neutrality by 2018.

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Southwestern energy was down 12 cents a share to close at $7.63 a share on Friday. Company’s stock received numbers of ratings changes post it’s fourth quarter and full year 2016 result on February 23. Analysts at Citi upgraded stock from “neutral” to “buy” and Jefferies group LLC upgraded it to “hold” from “underperform”. Other firms such as KLR group and Raymond James reiterated their ratings of “buy” and “hold” for the company respectively. Whereas Sanford C. Bernstein has downgraded its rating to “market perform” from “outperform”. Despite reporting a loss of $2.75 billion or $6.32 a share on revenue of $2.44 billion for the year 2016, the company is confident on its West Virginia Assets on slowly recovering natural gas prices, while the firm now controls virtually all Marcellus and Utica shale drilling and fracking in Ohio and Brooke countries. Southwestern ended year 2016 with 5,253 billions of cubic feet equivalent (Bcfe) of proved reserves, down from 6,215 Bcfe at the end of year 2015 and the company anticipates capex spending between $1.175 billion to $1.275 billion for 2017.

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Our Actionable Research on Chesapeake Energy Corporation (NYSE:CHK) and Southwestern Energy Company (NYSE:SWN) can be downloaded free of charge at Research Driven Investing.

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Disclaimer: This article is written by an independent contributor of and reviewed by Hemal K. Gandhi, a CFA® charter holder. is neither a registered broker dealer nor a registered investment advisor. For more information please read our full disclaimer at


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