Carl Icahn Offloads All Of His Stake In Chesapeake Energy Corporation

Carl Icahn Offloads All Of His Stake In Chesapeake Energy Corporation

Carl Icahn has offloaded all his Chesapeake Energy shares and Transocean shares. This does not come as a surprise, as Icahn has been selling his stake in Chesapeake for quite some time now, reports Investopedia.

Icahn rebalancing position in energy sector  

In August, he reduced his stake from 9.4% to 4.5%, citing tax planning as the reason. The billionaire investor held close to 73 million shares worth about $239 million at the end of 2015.

Icahn seems to be rebalancing his position in the energy industry, as he maintained his stake in Chenier Energy and Freeport- McMoRan, notes Investopedia. Further, he offloaded 250,000 shares in CVR Refining LP (CVRR); he had owned about 6 million shares worth roughly $113 million as of Dec. 31, 2015.

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In October prior to the third quarter conference call, Chesapeake Energy revised its production guidance and stated that it cannot achieve a cash neutral position until 2018. Earnings per share for the third quarter were reported at 9 cents per share, substantially outperforming analysts ‘expectation of 3 cents per share in losses.

Analysts have a consensus rating of Hold in the stock, unchanged since January 2015 when the stock was downgraded from Outperform. Recently Credit Suisse analyst Mark Lear gave a Hold rating and $7 price target on Chesapeake Energy, representing an upside potential of around 30%.

30% update for Chesapeake Energy

In the third quarter, oil production was effected by 8.2 Mbbl/d of sold volumes, and Chesapeake Energy highlighted a 91 Mbbl/d average in October, notes Lear. For the fourth quarter, Chesapeake has guided 90-95 Mbbl/d, implying a 3% jump in the mix to 16.5% at the midpoint of the 550-570 Mboe/d 4Q guidance.

In fourth quarter of fiscal 2017, the company expects a 10% jump in oil. In the fourth quarter of fiscal 2018, the company is expecting oil growth to rise by around 20%. The Credit Suisse analyst raised his 2016-2018 oil growth CAGR to 12% (from 7%) to reflect the updated growth commentary.

Year to date, the company has raised close to $1.3 billion in gross proceeds from asset sales and maintained its $2 billion gross proceeds guidance for the next year. Currently, two Haynesville packages of 126,000 net acres and 75 MMcf/d of production are up for sale. The sale is expected to close by the first quarter of 2017.

“Pro-forma for the Barnett sale closing, Chesapeake has $650MM in cash, and an additional $700MM would position the company to pay down its 2017 maturities and puttable bonds with minimal drawdowns on its $3.8 Bn revolver,” Lear says.

On Wednesday, Chesapeake shares closed down 2.31% at $5.91. Year to date, the stock is up more than 31%, while in the last year, it is down more than 3%.

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