Natural gas on Friday continued to sell off. I don’t think it should go without mentioning while all of this was happening Chesapeake Energy stayed relatively static. But something interesting happened Right at the end of the day Chesapeake got sold and before the futures session closed natural gas was bought.
Of course there are tons of variables at play here and Chesapeake energy’s market share for natural gas is only 5.25%. But Chesapeake Energy mentioned in its Q3 earnings call.. “Finally, we have a significant portion of our 2020 production volumes hedged with approximately 265 billion cubic feet of gas a 17 million barrels of oil hedged at $2.76 per mcf and $59.28 per barrel of oil”.
Due to the price action on Friday and these statements from Chesapeake Energy It Seems to me that their Extreme debt situation has caused them to gamble with future natural gas contracts calling them a “Tremendous lever”. While this may be true sometimes a stronger arm can do more than a big lever. Big levers break and anyone who has been in natural gas recently has seen a definite strong arm.