As was previously noted, Chesapeake Energy (CHK) announced a larger than expected loss along with a “going concern” line in the 10-Q. Many commenters further pushed the panic button by noting that the long-term debt (without the current portion) climbed from $7.3 billion to $9.1 billion in the latest 10-Q. How much more proof do you need that the company is going broke? There was of course the usual comment about the larger than expected losses to demonstrate that costs are clearly out of control when management cannot meet their own forecasts.
But this is what happens when a speculative investment hits a bump that attracts a lot of attention from commenters that do not normally cover the company. A lot of “rule of thumb” comments are quoted without tying those comments back to the specific situation and then it’s on to the next article in another industry. So let us take some of these arguments one step at a time and see exactly where this company is in the process of recovery.
Larger Than Expected Loss
Seeking Alpha had an announcement that the company missed guidance by $.02 per share. The chances of that being a statistically significant miss are slim to none. So many times this industry has a lot of variables even to the adjusted earnings that management cannot forecast accurately. Getting as close as management did to the actual result is probably the best an investor can expect.
In fact, the only reason larger companies tend to have accurate quarterly forecasts at…