02. Chesapeake Energy Corporation (NYSE:CHK)
Number of Hedge Fund Holders as of Q2 2022: 67
Chesapeake Energy Corporation (NYSE:CHK) has touched the peak of its popularity among hedge funds tracked by Insider Monkey during Q2 of 2022, with 67 hedge funds holding a stake as compared to 59 in the previous quarter. Oaktree Capital Management is the largest shareholder holding 10.5 million shares, valued at $852 million. On August 3, Chesapeake Energy Corporation (NYSE:CHK) CEO Dell’Osso revealed his plan to exit Eagle Ford shale in pivot to natural gas. The shale driller will focus solely on its gas-rich holdings in Marcellus and Haynesville basins. Following the news, the stock has gained 12.05% so far in the past month. On August 2, Chesapeake Energy Corporation (NYSE:CHK) posted GAAP actual earnings per share of $8.27 and $2.79 billion in revenue, both above the market consensus.
In its Q1 2022 investor letter, ClearBridge Investments Dividend Strategy mentioned Chesapeake Energy Corporation (NYSE:CHK) and explained its insights for the company. Here is what the fund said:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake (NYSE:CHK).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers.
The surplus of natural gas in North America has resulted in low prices and weak earnings for gas-focused producers. Exports, while growing, are restrained by the high cost of building export infrastructure. Europe, in a Faustian bargain, has relied on abundant, inexpensive Russian gas transported by pipeline.
Despite the abundance of low-cost resources and a superior environmental profile, the investment case for U.S. natural gas producers was previously unfavorable due to oversupply in the domestic market.
In the days preceding the invasion, we were quick to realize the war would change global energy flows. Europe is shifting away from Russia and toward new sources of imported liquified natural gas. We purchased our stakes in Chesapeake to capitalize on these trends. The recently announced energy pact between the U.S. and Europe represents an early positive datapoint in support of this investment thesis.”
