NEW YORK (TheStreet) -- Shares of Chesapeake Energy (CHK) - Get Report are up 1.91% to $6.92 in early market trading on Wednesday after the company announced that it is cutting 15% of its workforce in a cost cutting move.
The Oklahoma City-based natural gas producer will lay off 740 employees company-wide, with most of the layoffs coming from its headquarters in Oklahoma.
The company said that its Oklahoma City office will reduce its staff by 560, though the company will still continue to employ about 2,500 people in the region, according to Reuters.
Falling commodity prices are responsible for an industry wide downturn that has caused multiple firms to reduce costs.
"Over the past year, we have taken significant actions in response to the low commodity prices by reducing our costs and decreasing our capital spending," said CEO Doug Lawler. "The current commodity price environment continues to be a challenge for our industry and for Chesapeake."
TheStreet Ratings team rates CHESAPEAKE ENERGY CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
We rate CHESAPEAKE ENERGY CORP (CHK) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 2250.8% when compared to the same quarter one year ago, falling from $191.00 million to -$4,108.00 million.
- The debt-to-equity ratio of 1.29 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, CHK maintains a poor quick ratio of 0.70, which illustrates the inability to avoid short-term cash problems.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, CHESAPEAKE ENERGY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to $314.00 million or 76.77% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 67.58%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 2950.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- You can view the full analysis from the report here: CHK