Chesapeake surges after board member buys 2.1 million shares

Chesapeake Energy Corp. shares rose the most in two years after board member Archie Dunham, former chief executive of ConocoPhillips’ predecessor company, bought more than $4 million in additional stock.

Chesapeake Energy’s stock bounces as oil price jump offsets J.P. Morgan’s bearish callShares of Chesapeake Energy Corp. bounced sharply off a 10-month low Friday, as a big rally in oil prices helped offset J.P.

Dunham purchased 2.1 million shares Dec. 21, according to a filing with the U.S. Securities and Exchange Commission, nearly doubling his position this month to more than 1 percent of the company.

“Since I’m in for long term, when I get the opportunity to buy when the whole market drops like it did over the last 10 days I decided I would be foolish not to take advantage of it,” Dunham said in a phone interview.

Morgan analyst Arun Jayaram turning bullish on the oil and gas production company. Jayaram cut his rating to underweight, after being at neutral for at least the past three years, citing concerns over near-term headwinds from the $4 billion WildHorse Resource Development Corp. announced in late October.

The company’s shares have fallen 25 percent since the end of November, cutting its market capitalization to $2 billion. Despite a recent surge in natural gas prices, the whole sector has felt the weight of falling crude prices and the broader equities rout.

Chesapeake is in the midst of a strategy change, focusing more on oil production to become less reliant on gas. It agreed to buy WildHorse Resource Development Corp., a crude driller in Texas and Louisiana, in October for $2.27 billion.

Dunham is the former chief executive officer of Conoco Inc., the predecessor to ConocoPhillips. Chesapeak’s stock has tumbled 31% over the past three months, while the energy ETF has shed 10% and the S&P 500 has lost 7.1%.

He was appointed non-executive chairman of Chesapeake in 2012 over concerns about the company’s debt and spending under then-CEO and co-founder Aubrey McClendon. Together, Dunham and Chesapeake Chairman R. Brad Martin have bought shares several times in December.

The stock rallied 2.6% in morning trade, after closing Thursday at the lowest level since Feb. 21. “I can’t predict the bottom. I can’t predict the top,” Dunham said.

“None of us are that smart but, you know, I think I made a good purchase and I’m not going to look back,” The driller rose 27 percent to close at $2.19 a share in New York, the biggest gain since April 2016.

Jayaram said that although the acquisition, which provided increased oil weightings, was a “necessary step” to turn the corner on its turnaround plan, “the stock will likely be a ‘show me’ situation” as investors generally had mixed views on the East Texas Eagle Ford plays.

Meanwhile, the energy sector was broadly higher, with the SPDR Energy Select Sector ETF up 1.6% with 24 of 25 components gaining ground, as after reports that OPEC and Russia agreed to production cuts. Dunham isn’t worried about the majority of Chesapeake’s output being gas.

“If you are really playing the long term, I think you’re going to see a lot more natural gas liquefied and exported over the next 20 years as we build more terminals on the East Coast and the Gulf Coast,” Dunham said.

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