Chesapeake sells more assets. Market shrugs.September 12, 2012: 11:44 AM ET
Shares of embattled natural gas company Chesapeake Energy (CHK) have bounced back sharply in the past few months. The stock is up more than 50% from its 52-week low in mid-May, a time when investors were very nervous about low natural gas prices and the backlash facing a controversial company program that allowed CEO Aubrey McClendon to borrow money by using stakes in Chesapeake wells as collateral.
One reason for the excitement is that the company has been busy unloading assets to raise capital and pare down debt. But investors mostly yawned Wednesday after the company said it was selling portions of land and infrastructure in West Texas for nearly $7 billion to several groups, including oil giants Chevron (CVX) and Royal Dutch Shell (RDS-A).
Shares of Chesapeake rose more than 2% at the opening bell but they quickly slipped into the red and were down nearly 2% by late morning.
Traders on StockTwits were divided about the merits of the deal. Some wondered why the market didn't view it more favorably.
At first blush, it is odd that investors weren't more excited. It's clear that Chesapeake needs to cut its massive debt load in order to remain viable. What's more, some think that the sale signals that things may be turning up for natural gas prices.
Still, skeptics astutely point out that Chesapeake may have been forced into fire sale mode because of how low gas prices were. Even though the worst may be over with the McClendon scandal now that Chesapeake bowed to pressure from big investors Carl Icahn and Southeastern Asset Management and agreed to strip McClendon of his chairman title, there are legitimate worries that Chesapeake may be selling too much of a good thing.
Ouch. Another StockTwits user summed up the situation pretty succinctly.