Carl Icahn Offloads All Of His Stake In Chesapeake Energy Corporation

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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%.