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Shale pioneer Chesapeake Energy files for bankruptcy
- anthony_doan 6y agoWell... I’m glad I bail out of the energy sector stocks. Barrels are too low for shale and fracking. Texas is going to be hard hit this recession.
- molszanski 6y agoI think US tax payers will bail out coal, gas and oil companies anyway.
- gruglife 6y agoSad.... I know a lot of jobs are at stack but why can’t we just let these industries die?
- bpodgursky 6y agoIn the 20-year timeframe that would be great (a decarbonized economy), but short-term, it's really important that the US doesn't depend on Saudi Arabia as a sole oil producer, and that means maintaining some level of oil pumping infrastructure SA, Russia, and Venezuela are not the international players you want to have leverage over US foreign policy. If we let a weird unexpected market rout (like covid) wipe the shale producers out entirely, we really screw ourselves into letting SA call the shots on the world stage. Cuz you know SA and Russia are NOT going to let their pumping capacity collapse. (To be clear I'm not arguing for a bailout to prevent banks or investors from taking haircuts on the investments — those haircuts have to happen. But "letting all the jobs go" means letting the companies dissolve, vs reorganize, and that's not a good idea, IMO).
- __s 6y agoWhy not put heavy tariffs against those sources of oil? Voter resentment? Always neat seeing how much cheaper gas costs in the US compared to Canada, meanwhile the rhetoric would cause you to think otherwise
- throwaway1777 6y agoIt would crush the economy. Everything still runs on oil except the fraction of Teslas out there. Not to mention everything made of plastic and other oil derivatives.
- molszanski 6y agoNo. Most stuff runs on electricity. 60% or more is generated by oil + gas.
- gruglife 6y agoYou bring up a good point. My initial thought was that we would switch over to clean energy but to power the whole us is probably not feasible in the near term
- toomuchtodo 6y agoRoughly 70 percent of light vehicles can move from petroleum to electrification without any additional generation capacity in the US. Source is an NREL research paper I read ~7 years ago, can’t find the link at the moment.
- phire 6y agoIt's important to note that energy subsidies aren't inherently pro fossil fuels or anti green energy. Their only priority is to ensure that a given percentage of energy demand is met by domestic (or closely allied) suppliers. There are both National Security and Economic reasons for this. Not only does it prevent war by insuring no enemy thinks they can quickly force a surrender by cutting off energy supplied, but it also helps guard against things such as the OPEC oil shock of the '70s. What energy subsidies are trying to avoid is a scenario where the majority of fossil fuel is produced in the countries where it is cheapest, such as the Middle East or Russia. Such a scenario would give those countries a massive amount of economic power. If you want energy subsidies to not go to fossil fuels, you simply need to eliminate demand for fossil fuels. As fossil fuel demand drops, the energy subsidies assigned to them will also drop. They are only trying to maintain a domestic percentage. So cut domestic demand by 50% and fossil fuel subsidies will also drop by roughly half.
- AtlasBarfed 6y agoBut subsidies could have pushed certainly wind generation 50 years ago, rather than push oil and require a huge navy and military to secure our overseas oil interests. Solar probably could have been pushed substantially as well with better research funding. Battery storage probably could have been pushed for practical EVs earlier as well. Sure there's a lot of monday morning quarterbacking there, but we are in a major hole with GHG levels in the atmosphere, and our oil and gas friendly policies over the last century are a major cause.
- nemo44x 6y agoAccounting for reverse splits, etc, their stock was worth about $12,000.00 in 2008 when oil was really expensive. Trading at $11 as of last Friday. Was at $175 in January of this year. Tomorrow hits you hard. Fat tails are a thing.
- mgr86 6y agoDidn’t they have a reverse split a couple quarters back?
- o-__-o 6y agoYou mean last quarter? Yeah
- Acrobatic_Road 6y agoDon't you know? Bankruptcy is very bullish news these days on the wall street casino. Stocks only go up.
- ralston3 6y agoWhile I can appreciate the r/wsb lingo as much as the next degenerate, let’s try to keep it off of HN please
- anm89 6y agoThis has nothing to do stylistically, with how people post on Wall Street bets and its pretty reasonable economic commentary given the events of the last few weeks. Get off your high horse.
- sheeshkebab 6y agoOuch, it hertz
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- jdhn 6y agoWonder who's going to grab their assets. Maybe Exxon? Still a lot of oil in the fracking areas.
- adventured 6y agoThe majors rarely buy when they should, they only buy when they shouldn't (price based acquisition fever). Happens over and over again, with the latest being Occidental and Anadarko. The industry is almost universally stupid when it comes to acquisitions. Notice Exxon and Chevron didn't launch any big acquisitions during the extreme implosion in the industry with the pandemic. They always go into hunker down mode at the wrong time. Why haven't they stepped in to take out Occidental + Anadarko (the Anadarko deal was valued at a comical $55 billion)? They want to wait until the combination's current $16b market cap rebounds back to $35b (and then pay $42b for the deal), so they can be sure of what they're doing. And since Occidental paid so much for Anadarko by itself, they'll pat themselves on the back that they're paying a good price. Exxon bought XTO Energy (natural gas heavy) in Dec 2009 in an all-stock deal initially valued at $41b (plus an assumed ~$11b in debt). They bought them shortly after the natural gas price bubble crashed (I'm sure they thought it was a good deal) and right before shale production would permanently bury natural gas prices. Another classic poorly timed acquisition disaster in the industry. Analysts at the time of course overwhelmingly praised the deal as smart (calling XTO's price cheap). If anyone scoops up Chesapeake coming out chapter 11, most likely it will be private equity types specializing in energy markets. Then Exxon will buy it from them at a huge price increase in seven or eight years, right before an oil crash.
- empath75 6y agoNot worth getting in the near future.
- rurounijones 6y agoI am more wondering about who is going to pay for clean-up in the event that projects are left half-finished due to the bankcruptcy.
- bpodgursky 6y agoIt honestly feels pretty amicable. The lenders are working with the company ("The company has entered into a restructuring support agreement, which has the full backing of lenders to its main revolving credit facility"), and the company is reorganizing, clearing some debt, but staying operational. Which is pretty great for the US all-told. The US doesn't have to pump a barrel of shale oil to keep Saudi Arabia, Venezuela, Russia, and other petty despot oil states on the defensive, to stay independent of their whims. As long as the US has the ABILITY to spin up pumping once oil hits $50, who cares whether we are actually doing it? So overall, seems like fine news to me. Some banks are taking a haircut (better them than more taxpayer/bailout money). The infrastructure and organization sticks around. America stays independent of petty oil tyranny. Good news for America all around. This is what bankruptcy, done right, is for!
- Robotbeat 6y agoNot great for the climate, unfortunately. If fossil fuel companies can just go bankrupt and clear all their debt while continuing to operate without skipping a beat, it's nigh impossible for something like renewable energy to compete.
- MintelIE 6y agoIt'll dead cat bounce a few times, the smart money buys it on an up day and sells before noon.
- aparsons 6y agoIs that even legal? I thought you had to hold stocks for 3 days for transactions to settle?
- aparsons 6y agoNot sure why an honest question is getting downvoted, but you do you, HN.
- deleted 6y ago[deleted]
- snazz 6y agoHuh? Day-trading is a thing. Is this stock somehow special?
- RandomBacon 6y agoYou only have to wait three days for it to settle if you want to use those funds to buy a different stock.
- aparsons 6y agoThanks for explaining. Does this mean that each time a “day trader” makes a sale of $N, the minimum cash they hold over the next 3 days must be at least $N? Or does the exchange not make the cash available for 3 days? Also, can the same stock be re-bought within 3 days? I’ve seen a lot if different takes on these issues, and an unsure what to believe.
- jnwatson 6y agoWhen you sign up for a brokerage account, you select whether you want a “cash” or “margin” account. In a margin account, the brokerage essentially loans you the money until the sale clears. Day traders use margin accounts. You can indeed buy the same stock back, but it has tax implications. Look up “wash rules”.
- Apocryphon 6y agoI remember when I first joined Robinhood, the free share of stock I got was in $CHK. I believe they pulled out of trading a year or so ago?
- throwaway1777 6y agoWhat do you mean by that? The stock is still trading at the moment.
- owenversteeg 6y agoWhen stocks "disappear" like that, it's usually due to a split. CHK recently had a 1 for 200 split, so unless you had more than 200 shares of CHK then your broker (Robinhood for gp) would sell them for you.
- Ghjklov 6y agoRobinhood traders: "I'll take 1000 shares please."
- gregwebs 6y agoSaudi Arabia can get cheap oil, but the US hit peak cheap oil along time ago. Shale needs oil prices above $60/barrel. Energy input is an interesting way of looking at oil. In 1930 we used 1 barrel of oil to obtain 100 more. With shale you are getting closer to spending 1 barrel of oil to get 3. https://youtu.be/WeBtdwPpTQM?t=450 https://youtu.be/WeBtdwPpTQM?t=450
- jlmorton 6y agoThat's not quite true. The cost of producing shale oil has continued to fall. It started out high, but the industry breakeven price is now $48, and some producers can be profitable as low as $31.
- mdorazio 6y agoDo you have a source for this where I could read more? I'm continually fascinated by the downward pressure on oil production break-even prices.
- olivermarks 6y agouseful site https://oilprice.com https://oilprice.com
- unexpected 6y agoagreed. and while the cost of Saudi production is cheap, running the Saudi state is not. In the US, a sustained low oil price leads to a few bankruptcies. In Saudi, it will lead to political revolution.
- sand_castles 6y agoA sustained low price would cause a political revolution in North America much faster than in KSA. Without the need for holding dollars, rest of the world pulls the plug on the American financial system.
- absurdturd 6y agoWhy does political news get torpedoed from this site while bankruptcies from... shale oil companies... climb to the top? I honestly don't understand. Is this a "people in tech are rich" type of thing?
- blackrock 6y agoDaddy Powell to the rescue?
- victor106 6y agoIt’s interesting how companies can file for bankruptcy and can come out of it with not much damage done to the company. At a personal level you are essentially screwed for 7 years and even after that I think some companies don’t employ you. Can anyone point to any resources that provide a good introduction to the bankruptcy process in the US?
- TAForObvReasons 6y agoHostess "recovered" after their bankruptcy by selling assets to a new company (the new company is now Hostess Brands and the old one is "Old HB Inc"). The good parts of the company are in a new shell, and the unit economics allowed them to continue operation. All of the liabilities are in the old company. Many investors and pension holders took a loss, and many employees lost their jobs.
- genericresponse 6y agoCompanies that file for bankruptcy don't have much damage done to operations and the organizational structure because its ability to keep operating is usually the highest value outcome. That is- the company's continued operations bring in more money than selling off the assets. Most corporate bankruptcy is about not making enough money to pay their outstanding debts, not having money losing operations. Typically the owners lose all their investment and the debtors lose some of their investment. The debtors, in order of priority, are given ownership of the company by the court. The ability for ownership to exist separately from the "operating" company, for the owners to only be liable up to losing their investment, not more, and for the management and employees not to directly lose money is sorta the "why" for corporations to exist.
- JumpCrisscross 6y ago> is sorta the "why" for corporations to exist It’s why bankruptcy, specifically, restructuring exists. Lots of countries don’t have restructuring codes. When their corporations go bankrupt, the assets automatically go to the creditors and/or are liquidated.
- dodobirdlord 6y ago
- AtlasBarfed 6y agoPeople talk all the time about ascendant technologies and industries riding economies of scale, such is happening with wind / solar / batteries / EVs. But people don't talk about the fact that the opposite can occur with industries. Petroleum has ridden huge economies of scale to the point their refining facilities are massive, their transport ships are massive... and there is bloat. But more importantly, most of the cheap extraction oil is gone. The current economies of scale were keeping shale/tar sands extraction with terrible EROEI profitable. But a contraction in demand makes those unable to be used. A compression in demand will make refineries less profitable, and tankers less profitable. And this is a cycle of destruction, just like economies of scale boosting rising technologies is an enhancing feedback cycle. Oil and Gas is going to be rocky fall down a steep mountain.