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Chesapeake cuts dividend, bonds weaken; Consol rebounds on spinoff chatter; AMD pressured
By Stephanie N. Rotondo
Phoenix, July 21 – Despite a rebound in crude oil prices, distressed oil and gas names continued to see weakness in Tuesday trading.
Chesapeake Energy Corp. was a notable loser of the day, as the bonds dropped as much as 5 points during the session. The losses came after the natural gas producer said it was cutting its dividend payment.
Chesapeake also announced that it was selling nearly all of its stake in CHK Cleveland Tonkawa LLC to FourPoint Energy LLC. Proceeds from that sale will be used to redeem preferred stock interests in the partnership, which will reduce dividend payments by $75 million per year.
Other adjacent properties are also being sold for $90 million in cash.
“We think the moves are prudent, but also signal [the company’s] concern that market weakness is likely to continue,” write Gimme Credit analyst Philip C. Adams in an afternoon comment released Tuesday.
While the oil and gas space was generally softer, Consol Energy Inc. rebounded from its Monday lows. The rally was attributed to news the company’s largest shareholder was looking to monetize assets.
There was also some weakness outside of the oil and gas realm.
Advanced Micro Devices Inc. paper was in retreat following IBM Corp.’s earnings. Though IBM released numbers that were largely better than expected, the company did show a decline in revenue – a problem AMD is well acquainted with, based on its most recent quarterly results.
Meanwhile, Caesars Entertainment Corp. bonds were mixed after the parent of bankrupt Caesars Entertainment Operating Co. said it had reached a restructuring deal with second-lien creditors.
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