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Re: Chesapeake Energy files for bankruptcy

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Re: Chesapeake Energy files for bankruptcy

Chesapeake filed for bankruptcy because Aubrey McClenden was a lavish spender who ran up CHK debt to equal  the total debt of XOM and CVX. Between 2010-2012 CHK ran up 30B in debt in drilling and production costs which generated 0 revenue. Many expenses were for frivolous projects such as $200M for 2 parking garages and a secret wine cellar. 

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Re: Chesapeake Energy files for bankruptcy

"Kinder Morgan Inc. has the most interstate gas capacity contracted with Chesapeake,"

 

While not enough to materially affect KMI's balance sheet, it may be the canary in the coal mine.

veni vidi vici vti
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Re: Chesapeake Energy files for bankruptcy


@yogibearbull wrote:

2020 oil bankruptcies list grows.   https://www.haynesboone.com/-/media/Files/Energy_Bankruptcy_Reports/Oil_Patch_Bankruptcy_Monitor

Screenshot 2020-06-28 16.39.00.png


The wealth of the those oil patch states go down with these bankrupties. The debt also increases. The folks in these states are loosing biggly. Since the Chinese also stopped importing food and meat items, their problems are compunding. Either they have to raise the taxes to keep up the services or reduce the services.

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Re: Chesapeake Energy files for bankruptcy

My question is who is  losing real money on this bankruptcies.

Management is making money with salaries and bonuses, institutional investors are smart enough to make money - they know the reward risk tradeoff on these and are probably hedged or protected by assets and retail investor will not touch these as these are too risky.

Then who is losing the real money? (not the paper money ie stock going up and down)

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Re: Chesapeake Energy files for bankruptcy

I think CHK was a stock Bill Nygren loaded up on in OAKLX, together with APA. I don’t see it there now, so he seems to have escaped its final implosion. Still, CHK’s chart doesn’t look that great, and it’s hard to see how one could have made much money with it. Same for Apache.

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Re: Chesapeake Energy files for bankruptcy


@waffle wrote:

My question is who is  losing real money on this bankruptcies.

Management is making money with salaries and bonuses, institutional investors are smart enough to make money - they know the reward risk tradeoff on these and are probably hedged or protected by assets and retail investor will not touch these as these are too risky.

Then who is losing the real money? (not the paper money ie stock going up and down)


Current stockholders are potentially wiped out [many may sold already at steep losses]. Recent retail trading in bankrupt companies is definitely weird. Most of the time, a new stock is issued on restructuring after cancelling the old stock. Some have the mistaken belief that if they hang on to the old stock, it may comeback, but in most cases, it never will.

Current bond holders also take huge haircuts but may get new stock and/or warrants [in exchange for old debt] and those have future recovery potential. But for now, they are stuck in the so-called roach-motel.

Investors who provide DIP financing for restructuring are ahead of everybody and likely benefit the most. Bankruptcy advisors and restructuring management also benefit with very high fees and salaries - sometimes so high that companies don't make it out of bankruptcy.

YBB
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Re: Chesapeake Energy files for bankruptcy


@waffle wrote:

My question is who is  losing real money on this bankruptcies.

Management is making money with salaries and bonuses, institutional investors are smart enough to make money - they know the reward risk tradeoff on these and are probably hedged or protected by assets and retail investor will not touch these as these are too risky.

Then who is losing the real money? (not the paper money ie stock going up and down)


As of the end of 2019 19 hedge funds held CHK . Only 15 held it as of end of First Qtr 2020.

on Sept 16,2019 CHK closed at 412. Now below 12.

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Re: Chesapeake Energy files for bankruptcy

@chang - You are correct on Nygren and CHK.

"...With these criteria in mind, Nygren divested of the fund’s holdings of energy giants Halliburton Co. (NYSE:HAL) and Chesapeake Energy Corp. (NYSE:CHK) during the quarter.

In his fourth-quarter letter to shareholders, Nygren emphasized that these sales “do not reflect a change in our view of the energy sector’s overall attractiveness,” but were executed to “recognize a tax loss and deploy the proceeds into more attractive opportunities within the same industry.

Nygren sold all 59.9 million shares of Chesapeake Energy, which had an impact of -0.55% on the equity portfolio. Shares traded for an average price of 99 cents each during the quarter.

Based on GuruFocus data, the fund lost approximately 71% on the investment since establishing it in the first quarter of 2017." - From Gurufocus article March 6th, 2020 syndicated by Forbes

So answer to my question - Value investors are losing their fund investors money on these stocks.

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Re: Chesapeake Energy files for bankruptcy


@waffle wrote:

@chang - You are correct on Nygren and CHK.

"...With these criteria in mind, Nygren divested of the fund’s holdings of energy giants Halliburton Co. (NYSE:HAL) and Chesapeake Energy Corp. (NYSE:CHK) during the quarter.

In his fourth-quarter letter to shareholders, Nygren emphasized that these sales “do not reflect a change in our view of the energy sector’s overall attractiveness,” but were executed to “recognize a tax loss and deploy the proceeds into more attractive opportunities within the same industry.

Nygren sold all 59.9 million shares of Chesapeake Energy, which had an impact of -0.55% on the equity portfolio. Shares traded for an average price of 99 cents each during the quarter.

Based on GuruFocus data, the fund lost approximately 71% on the investment since establishing it in the first quarter of 2017." - From Gurufocus article March 6th, 2020 syndicated by Forbes

So answer to my question - Value investors are losing their fund investors money on these stocks.


How could nygren trade 59.9M shares of CHK at An average price of 99 cents in Q4 when stock closed at 166 on Dec 31?

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Re: Chesapeake Energy files for bankruptcy

You are right. Buggy/ low quality of article by Gurufocus. 

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