If you’re an energy trader, MercBlock pro Dan Dicker tells us, Chesapeake is not stock you want in your portfolio.
It seems the company is facing some serious headwinds.
First, published reports say Chesapeake has landed in the crosshairs of the SEC. According to Reuters, regulators have opened an informal inquiry into Chesapeake’s controversial program that granted Chief Executive Aubrey McClendon a share in each of the natural gas producer's wells.
“This is the kind of development that could easily erode shareholder confidence,” explains Dan Dicker on Fast Money's Halftime Report. “Even if an investor wants to buy a nat gas stock, they'll have to ask themselves, should I buy this one?”
"I agree it's a problem," concurs trader Pete Najarian. "Investors will ask themselves if they really know what's going on with this company."
And on top of the regulatory woes, Dicker adds “Lower natural gas prices have also really hurt this company. Chesapeake has to develop leases that Aubrey McClendon has continued to buy for the last 5 years. And they’re going to need asset sales to finance all of it.”
All told, “You’ve got to sell it, here,” counsels Dicker. Considering the negative catalysts, “I think this stock trades down into the single digits.”
However, if he's right and the stock does sell-off, trade cautiously. “The assets are fantastic," he adds. "Someone like Exxon could step in, but at a much low price."
