Reports emerged on March 16 that Chesapeake Energy (NYSE: CHK) had hired debt restructuring advisers. The advisers included restructuring attorneys Kirkland & Ellis LLP and investment bankers at Rothschild & Company who are familiar with debt restatement. Their job, or if they so choose, is to figure out what to do with the oil and gas company’s $9 billion debt. The announcement did little for CHK’s shares and it appears there is a pending CHK lawsuit investigation by investors against financial advisors.
In these instances there are other options to a traditional state or federal court lawsuit. These are private arbitration customer disputes with the Financial Industry Regulatory Association (FINRA) for customers who suffered investment losses.
These claims are typically filed against the financial firm that made the recommendation to the investor and these claims are generally faster and more efficient than a traditional lawsuit. The claim process is typically limited paper discovery only with no depositions involved. These claims are most often handled by experienced attorneys specializing in these proceedings and familiar with the highly regulated financial services industry. The claims are typically handled on a contingency fee basis with no recovery, no fee, terms.
Can Restructuring Save CHK Stock? CHK Lawsuit
A few weeks, it was reported that about the company’s plan to reverse-split to stay on the grace of the New York Stock Exchange. Whether shares were split or not, Chesapeake was a stock joke.
While I am sympathetic for employees, CEO Doug Lawler should have been more direct with investors in recent years as he struggled to find his base and positive free cash flow. Now he wants investors to believe that restructuring is the tonic to cure what ails him. Unfortunately, Saudi Arabia plans on capturing all the oil market.
Saudi’s Oil Price War Destroys CHK and Most Oil Producers
If Saudi Arabia were not so intent on capturing control of the world oil market, they could understand the argument. However, unless the Saudis change their minds, the game is over for Chesapeake Energy. This is why.
The opinion piece by former Saudi Arabian government adviser Nawaf Obaid, dated March 20 on CNN Business, explained how it would be nearly impossible it would be for an oil producer not called Saudi Aramco to survive in a world where oil prices are falling so low, like $15 a barrel.
“The Saudi finance ministry and the Saudi Arabian Monetary Authority (SAMA) are designing financial government expenditure plans that can sustain oil prices falling as low as $30 per barrel on average for at least the next five years, with temporary dips as low as $15 per barrel, according to various government financial projections,” Obaid stated.
“Aramco CFO Khalid Al Dabbagh re-emphasized this point by saying ‘We [Aramco] are very comfortable we can meet our shareholders’ expectations at $30 a barrel or even lower.'”
Obaid said Saudi Arabia would not stop the price war until it becomes the world’s largest oil producer. He is currently in third place, but is ready to move to Russia in the next month or so. At the current pace, it will jump over the United States within 24 months.
Morning Stock Market Report
S&P futures are lower, down 60 to 61 points, as…
- The House of Representatives is expected to vote on the stimulus bill today after Speaker Nancy Pelosi said she anticipates strong bipartisan support.
- The number of domestic coronavirus cases exceeded that of China as infections in New York gained, yet the number of fatalities remain lower.
- The Federal Reserve’s Jerome Powell and Treasury Secretary Steven Mnuchin continued to strike an optimistic tone on the amount of stimulus potential and its economic impact.
European markets dropped as…
- A European Union leaders’ meeting failed to produce a unified strategy on how to deal with the negative impact of the coronavirus, delaying the process by another two weeks.
- Italy’s new coronavirus cases rose by the second-highest amount since the outbreak began there, with a mortality rate around 11%.
- Group of 20 leaders pledged to add over $5 trillion in stimulus to aid the global economy.
Asian markets gained as…
- Investor optimism increased regarding the potential for global governments and central banks to boost their stimulus response to the coronavirus outbreak.
- The Dow Jones Industrial Average experienced its best three-day rally since the Great Depression, encouraging follow through.
- China will halt the entry of foreigners holding valid visas beginning Saturday, in an attempt to halt the coronavirus outbreak from surging once more.
- The Reserve Bank of India cut its benchmark interest rate from 5.15% to 4.40% and lowered banks’ reserve requirement from 4% to 3%.
And ahead of…
- Core PCE Deflator, Income for February (8:30 a.m.)
- Final University of Michigan Sentiment for March (10 a.m.)
- Baker Hughes Rig Count Data (1 p.m.)
- CFTC Commitment of Traders Report (3:30 p.m.)
Asia – Japan’s Nikkei +3.88%, Japan’s TOPIX +4.30%, China’s Shanghai Composite +0.26%, Hong Kong Hang Seng Index +0.56%, South Korea’s KOSPI +1.87 %, Taiwan’s TSE -0.38%
Europe – EuroStoxx 50 -2.38%, UK FTSE -3.82%, German DAX -2.43%, French CAC -3.59%, Italian MIB -2.00%, Spanish IBEX -3.22%
VIX +4.11 %
Currencies – Dollar -0.01%, Japanese Yen +0.96%, Euro -0.06%, British Pound +0.72%, Swiss Franc +0.19%, Chinese Yuan -0.27%
WTI Crude +0.13%
Brent Crude -0.66%
Nat Gas -0.18%
US Treasury 10 yr yield -8.3bps at 0.761%
US Treasury 2 yr yield -3.1bps at 0.261%
German 10 yr yield -8.7bps at -0.457%
French 10 yr yield -6.2bps at -0.064%
Italian 10 yr yield +9.0bps at 1.306%
Japanese 10 yr yield +1.5bps at 0.002%
Tom, aka T Rex, is seasoned financial pro that cut his teeth on the Chicago trading oil futures in 1995. In less than 3 years he bought his own seat and set up shop on the exchange. For the next 10 years Rex traded his own account and some institutional accounts. In 2017, he decided to move to Florida and focus on educating traders and writing for financial websites.