Download - Oil Stocks Got Eviscerated This Week
Oil Stocks Got Eviscerated This Week
This was an awful week for the market, which is now off to its worst start...ever. Among the weights pulling down the market were the
price of crude, which plunged below $30 per barrel for the first time since 2004. That led to a very steep drop in oil stocks,
including Williams Companies (NYSE: WMB), Seadrill (NYSE: SDRL), Chesapeake Energy (NYSE: CHK), Denbury Resources (NYSE:
DNR), and Whiting Petroleum (NYSE: WLL).
What:Williams Companies (NYSE: WMB) slipped more than 15% this week.
So What: Key driver: Credit
downgrades and merger concerns
Williams’ credit was downgraded by Moody’s and Fitch this week
These downgrades pushed its credit rating into junk territory
Now What: Making matters worse,
reports surfaced that suggested the Williams’ merger with Energy Transfer Equity was looking shaky
Key takeaway: Investors are gravely concerned that Williams’ deal will fall apart, leaving it a much weaker stand-alone entity
What:
Seadrill (NYSE: SDRL) sank 18% this week.
So What: Key driver: Seadrill’s
market outlook and analyst downgrades
Seadrill CEO Per Wulff said this week that market conditions could remain challenging through 2017
Now What: Meanwhile, analysts were harsh:
Cowen slashed Seadrill’s price target from $8 to $3
J.P. Morgan analysts said that Seadrill will require "major evasive action" to avoid covenant breaches in 2016 or 2017
Key takeaway: Investors and analysts just don’t see any reason to own Seadrill
What:Chesapeake Energy (NYSE: CHK) slumped 22% this week.
So What: Key driver: Debt concerns
and a downgrade One of Chesapeake
Energy’s bonds fell to just $0.29 on the dollar
That price shows grave concern from the market about the company’s ability to pay back its debt
Now What: Meanwhile, analysts from
Guggenheim slashed its 2016 outlook on the company, expecting it to lose $0.59 per share, which is $0.05 per share worse than its previous outlook
Key takeaway: Investors and analysts are worried that Chesapeake Energy isn’t going to make it through this downturn
What:Whiting Petroleum (NYSE: WLL) fell more than 26% this week.
So What: Key driver: Two analyst
downgrades Morgan Stanley
downgraded Whiting from equal weight to underweight, while reducing its price target from $23 to $4
Now What: UBS downgraded Whiting from
buy to neutral, and slashed its price target from $19 to $7
Meanwhile, Barrington gave up covering the entire energy sector, including Whiting, saying that it was just too speculative to recommend oil stocks right now
Key takeaway: Analysts are getting fed up with the continued drop in crude and its impact on companies like Whiting
What:Denbury Resources (NYSE: DNR) slumped more than 26% this week.
So What: Key driver: Trouble with
its bond exchange Denbury Resources’
proposed bond exchange is getting push back from bondholders
Now What: The company was forced
to sweeten the deal to fix some loopholes
Key takeaway: The fact that the company needs to pursue a bond exchange deal has investors worried that it’s financially stressed
This could be the next billion-dollar iSecret