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Aug. 1, 2019, 3:40 p.m. EDT

Whiting Petroleum, Chesapeake Energy stock plunges highlight energy sector selloff

Crude oil prices tumble; Whiting lays off 33% of its employees and reports another surprise loss

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By Tomi Kilgore, MarketWatch


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Shares of energy companies were in broad decline Thursday, highlighted by the plunges in Whiting Petroleum Corp.’s and Chesapeake Energy Corp.’s stocks, as crude oil prices were suffering their worst one-day performance in nine months.

The SPDR Energy Select Sector exchange-traded fund /zigman2/quotes/206420077/composite XLE +0.07%  slumped 2.3%, with 23 of 29 equity components losing ground. The energy sector was the weakest of the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.28% 11 key sectors.

Continuous crude oil futures /zigman2/quotes/209723049/delayed CL00 -0.20% dropped 7.4% toward the biggest one-day drop since November 2018, weighed down by strength in the U.S. dollar. Read Futures Movers.

Also weighing on markets was President Donald Trump’s call to impose 10% tariffs on $300 billion worth of Chinese goods imported into the U.S., beginning Sept. 1. The levies don’t include the $250 billion worth of goods already subject to tariffs. See Market Snapshot.

That helped drag down the shares of oil-and-gas company Chesapeake Energy /zigman2/quotes/201364537/composite CHK 0.00% , as they tumbled 8.3% in active afternoon trading. The stock closed Wednesday about 15% above the 20-year closing low of $1.58 seen two weeks ago, on July 18.

Based on an analysis of FactSet data, the correlation coefficient between Chesapeake’s stock and crude oil futures over the past year is 0.8, where 1.0 means they move exactly in sync.

/zigman2/quotes/201364537/composite CHK 1.31, 0.00, 0.00%

Separately, Whiting’s stock plummeted 39% toward a record low close, and was on track to suffer the biggest one-day percentage plunge since the oil-and-gas company went public in November 2003.

The company said late Wednesday it reduced its workforce by 33%, or 254 employees, as part of a restructuring aimed at $50 million in annual cost savings.

“We aim to be as efficient as possible and that is why we made the difficult decision to reduce our workforce in order to realize significant annualized cost savings,” Chief Executive Bradley Holly said. “The decision to reduce headcount is always a difficult one as it impacts talented colleagues and friends, but it is a necessary step in our company’s transformation.”

Separately, Whiting swung to a net loss of $5.7 million, or 6 cents a share, after income of $2.1 million, or 2 cents a share, a year ago in the second quarter. Excluding non-recurring items, the adjusted loss per share was 28 cents, compared with the FactSet EPS consensus of 28 cents.

Revenue fell 19% to $426.3 million, missing expectations of $456.3 million, while production increased 0.7%.

For 2019, Whiting cut its guidance range for millions of barrels of oil equivalent (MMBOE) production to 45.0 to 46.5 from 46.7 to 47.7.

/zigman2/quotes/204602363/composite WLL 6.74, +0.08, +1.20%

Analyst Leo Mariani at KeyBanc Capital downgraded Whiting to sector weight from overweight, as the company’s results included the three strikes of lower oil production, higher cash costs and weaker pricing.

Elsewhere, Concho Resources Inc.’s stock /zigman2/quotes/208942254/composite CXO -2.52% sank 23% to pace the energy ETF’s decliners, after the shale producer missed second-quarter profit expectations, provided a third-quarter production outlook that was below second-quarter levels and cut its natural-gas price realization outlook due to weak natural gas and natural gas liquids pricing.

Among other more-active energy sector shares, Halliburton Co. /zigman2/quotes/210488727/composite HAL +1.15%  shed 6.1%, Exxon Mobil Corp. /zigman2/quotes/204455864/composite XOM -0.13% dropped 2.8%, Marathon Oil Corp. /zigman2/quotes/205031829/composite MRO -0.60% slumped 4.7%, Cabot Oil and Gas Corp. /zigman2/quotes/205804016/composite COG +0.28% gave up 2.1% and Chevron Corp. /zigman2/quotes/205871374/composite CVX +0.21% slid 2.1%, while Kinder Morgan Inc. /zigman2/quotes/208455654/composite KMI +0.25% gained 0.7%.

Exxon Mobil and Chevron are scheduled to report second-quarter earnings before Friday’s open.

Preview: Chevron, Exxon earnings: Shale M&A is high on the list of investor concerns

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2,997.95
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Volume: 7,452
Oct. 18, 2019 12:32a
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US : U.S.: NYSE
$ 1.31
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Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York. You can follow him on Twitter @TomiKilgore.

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