
Shale pioneer Chesapeake Energy files for bankruptcy - hhs
https://www.reuters.com/article/us-chesapeake-enrgy-bankruptcy/shale-pioneer-chesapeake-energy-files-for-bankruptcy-idUSKBN23Z0SS
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nemo44x
Accounting 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.

~~~
Acrobatic_Road
Don't you know? Bankruptcy is very bullish news these days on the wall street
casino. Stocks only go up.

~~~
ralston3
While I can appreciate the r/wsb lingo as much as the next degenerate, let’s
try to keep it off of HN please

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bpodgursky
It 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
Not 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.

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victor106
It’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?

~~~
genericresponse
Companies 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
> _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.

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gregwebs
Saudi 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
That'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.

~~~
bretpiatt
Here's published numbers where Exxon only needs $26.90 to make a profit on New
Mexico shale[1]. US producers are much more globally competitive than the
general media narrative (I'm mostly a tech person in Texas but I socialize
with energy folks a good bit).

[1] [https://www.cnbc.com/2020/03/16/reuters-america-analysis-
few...](https://www.cnbc.com/2020/03/16/reuters-america-analysis-few-u-s-
shale-firms-can-withstand-prolonged-oil-price-war.html)

~~~
AtlasBarfed
I wrote this elsewhere, but I'm sure such prices require a certain amount of
demand to keep the scale of production high enough.

But if demand falls that saudi oil can handle all the demand, and the Saudis
know that wind/solar/EV is going to kill off oil so they better make money
while they can (which is why they sold off Aramco), then they will sell what
they can to keep it under what is profitable for the US alternative sources.

~~~
chii
> why they sold off Aramco

they barely sold off a 1.5% stake, and sold it to their own citizens, who are
"forced" to buy it.

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Apocryphon
I 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?

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throwaway1777
What do you mean by that? The stock is still trading at the moment.

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owenversteeg
When 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.

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anthony_doan
Well... 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.

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molszanski
I think US tax payers will bail out coal, gas and oil companies anyway.

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gruglife
Sad.... I know a lot of jobs are at stack but why can’t we just let these
industries die?

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bpodgursky
In 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
Why 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
It 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
No.

Most stuff runs on electricity.

60% or more is generated by oil + gas.

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AtlasBarfed
People 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.

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jdhn
Wonder who's going to grab their assets. Maybe Exxon? Still a lot of oil in
the fracking areas.

~~~
adventured
The 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.

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MintelIE
It'll dead cat bounce a few times, the smart money buys it on an up day and
sells before noon.

~~~
aparsons
Is that even legal? I thought you had to hold stocks for 3 days for
transactions to settle?

~~~
RandomBacon
You only have to wait three days for it to settle if you want to use those
funds to buy a different stock.

~~~
aparsons
Thanks 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
When 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”.

~~~
aparsons
Thanks for explaining

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blackrock
Daddy Powell to the rescue?

