Exxon & Chevron on the Rise | Chesapeake Continues to Dwindle

The price of oil is starting to pick up again but natural gas is resuming its descent. In the mean time Chesapeake Energy Corporation (CHK) might be on a verge of selling its pipeline to finance its funding problems; Exxon and Chevron stocks are on the rise.

Oil and Natural Gas

Yesterday, the price of WTI spot oil rose by 0.87% to $85.02; United States Oil (USO) price also increased by 1.22%; Brent oil also increased by 2.21% to reach $100.73. The recent rally in oil prices may have slightly helped energy companies’ stock prices including Exxon Mobil Corporation (XOM), Chevron Corporation (CVX) and Chevron Corporation (CVX).

On the other hand, the price of natural gas slipped yesterday as Henry Hub (short term future) declined by 1.22%; United States Natural Gas (UNG) price fell by 0.47%. These low prices of NG aren’t helping these energy companies.

I still think that both crude oil and natural gas prices will continue to decline in the weeks to follow (assuming all things equal) and this could also slightly bring down the stock prices of these energy companies.

Let’s see if there are any big headlines for these leading energy companies that could also affect the prices their stocks:

Chesapeake Energy Corporation

Chesapeakecontinues to be in the news and its funding problem is still affecting its stock price. The recent news from this front is that the company is in talks to sell its pipeline asset for an estimated amount of $4 billion to Global Infrastructure Partners (GIP). This might not be the only asset the company is planning to sell this year. There are no verifications for this deal yet but the company’s annual meeting will be held tomorrow June 8th. Perhaps by then there will be some more substantial reports for this deal. If there will be big headlines coming out of this meeting it could also have some effect on the stock price. I think as long as the company will continue to dump assets to finance its funding problems this means the company’s operations will further shrink and in turn may also likely to further bring down the company’s value.  Finally the recent changes in oil and natural gas prices might also explain some of the changes in Chesapeake stock: during 2012 the linear correlation between the oil WTI (C12 future) and Chesapeake stock was 0.26. This means the volatility of oil price might explain at best less than 7% of Chesapeake‘s stock changes.

In regards to natural gas the linear correlation with Chesapeake’s stock was 0.21; this means that the natural gas price could explain at best 4.4% of the Chesapeake’s stock changes.

Exxon Mobil Corporation

This company’s stock price sharply rose yesterday by 3.3%. Since this stock price is strongly correlated with the changes in oil prices, this company’s rally may have also been partly due to the recent rise in oil prices. As I have already reviewed in the past, since oil and  this company’s stock are strongly linked with a linear correlation between the daily percent changes of WTI oil (C12 future) and XOM stock price at 0.49 (during 2012). This means the volatility of oil rate might account at best for nearly a quarter of the of Exxon’s stock volatility.

It was also recently reported in regards to Exxon Mobil’s business development that Exxon to take a 10% stake in a JV to explore for gas trapped in Australian coal seams.

Chevron Corporation (CVX)

This company’s stock also sharply rose yesterday by 3.4%. This stock price, much like Exxon, is strongly correlated with oil prices. On the other hand there were problems Chevron was facing in the news in recent days in Brazil including:

Brazil’s oil regulator will fine Chevron for the oil spill from back in November in the Frade field off the coast of Rio de Janeiro. It’s not clear what will be the fine’s value yet. This oil spill might also be among the reasons for Chevron’s problems in receiving its Brazilian oil drilling rights.

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