Chesapeake Energy Corporation (NYSE:CHK) stock skidded on Wednesday, continuing the downtrend it’s been on since after the initial positive burst following the Q4 earnings release. Investors were initially pleased with those results, but analysts soon talked them down by debating the topic of asset sales. Chesapeake Energy stock tumbled more than 7% in heavy volumes in intraday trading, possibly hit hard by Oklahoma regulators’ new fracking requirements.
On Tuesday, the Oklahoma Corporation Commission ordered all companies that are fracking in certain areas of the state to use a seismic array so that they can detect underground movement, but that’s not the biggest concern with the new regulations. Regulators also cut the threshold for pausing fracking for at least six hours to a 2.5 magnitude, down from the previous threshold of a 3.0 magnitude. Additionally, News OK reports that regulators have lowered the magnitude for pausing work at all from 2.5 to 2.0 for quakes picked up in the area of an operation.
Oklahoma regulators tightened fracking restrictions because of the growing problem of shale earthquakes. In a press release, commission director Tim Baker said they believe that the number of earthquakes that were actually felt by people over the last year are due to fracking activities in the STACK (Sooner Trend Anadarko Basin Canadian and Kingfisher) and SCOOP (South Central Oklahoma Oil Province) plays.
Officials in Oklahoma have detected 74 quakes with magnitudes measuring at least 2.5 that they believe to be related to fracking. Regulators believe that tightening the restrictions around fracking will help reduce the number of quakes caused by the practice.
Chesapeake Energy stock wasn’t the only energy stock to be rocked today, which suggests that the new Oklahoma fracking requirements might have something to do with it. Devon Energy Corp (NYSE:DVN), SandRidge Energy Inc. (NYSE:SD) Marathon Oil Corporation (NYSE:MRO), and Newfield Exploration Co. (NYSE:NFX), which also drill in Oklahoma, were also in the red today. Earlier this year, OK Energy Today reported that permits were handed out to several of these companies, including Chesapeake Energy. Analysts and investors were already perturbed with Chesapeake’s weaker-than-expected production guidance, so the news that the company may have to pause work in some of its assets more often than it already had to probably isn’t being taken very well.
There also appear to have been some sizable block trades done in Chesapeake Energy stock today as well, signaling smart money movement in either direction. Benzinga Pro picked up three block trades each for 500,000 shares of Chesapeake Energy stock today. The first set hit not long after opening bell for $2.975, while the second one came an hour later for $2.89. The third block trade came before midday at $2.91.
Block trades are orders or trades for a large number of shares of a particular stock. They’re usually done by hedge funds or institutional investors that want to buy or sell sizable positions via major investment banks.
Chesapeake Energy stock plunged more than 7% to as low as $2.82 in intraday trading on the New York Stock Exchange today.