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Here’s Why Chesapeake Energy Corporation (CHK) Is Surging Today

Chesapeake Energy Corporation (NYSE:CHK) shares have surged 8.5% in early afternoon trading due to rising WTI and stronger natural gas prices. As of 1:30 PM, front month WTI futures have rallied ~2% as Wednesday’s EIA report came in better than expected. Not only did the crude inventory build of 900,000 beat expectations of +1.36 million, but also gasoline and distillate stockpiles fell sharply, by 3.7 million and 2.5 million barrels, respectively. In many traders’ eyes, the strong EIA report makes it more likely that OPEC will extend its production cut. Similarly, natural gas prices have also rallied over 2% for the day as sentiment in the commodity has turned somewhat bullish. Given that its a leveraged name, Chesapeake Energy Corporation (NYSE:CHK) benefits from higher oil prices with higher cash flow and lower net debt/estimated EBITDA.

In terms of analyst commentary, Jason Wrangler of Wunderlich recently reiterated his $10 price target and ‘Buy’ recommendation on Chesapeake Energy Corporation (NYSE:CHK), noting the company’s ‘compelling valuation alongside natural gas exposure, oil growth and an improving balance sheet’.

What Does The Smart Money Sentiment Say?

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 39.7% gains over the past 12 months and outperformed the 24.1% gain enjoyed by the S&P 500 ETFs. Our enhanced small-cap hedge fund strategy returned more than 45% over the last 12 months and outperformed SPY by more than 30 percentage points over the last 4.5 years (see details here).

Of the 742 elite funds we track, 41 funds owned $884.01 million of Chesapeake Energy Corporation (NYSE:CHK) and accounted for 14.20% of the float on December 31, versus 41 funds and $1.33 billion respectively on September 30.

The Bottom Line

Chesapeake Energy Corporation (NYSE:CHK) is once again in bull mode as sentiment surrounding oil and gas improve. Today’s EIA numbers show that distillate inventories are falling faster than expected as summer driving season approaches. For those of you interested, also check out this interesting article on the 10 countries most reliant on oil. 

Disclosure:None

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