Oil Stocks Got Eviscerated This Week

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Oil Stocks Got Eviscerated This Week


This was an awful week for the market, which is now off to its worst start...ever. Among the weights pulling down the market were the price of crude, which plunged below $30 per barrel for the first time since 2004. That led to a very steep drop in oil stocks, includingWilliams Companies(NYSE: WMB),Seadrill(NYSE: SDRL),Chesapeake Energy(NYSE: CHK),Denbury Resources(NYSE: DNR), andWhiting Petroleum(NYSE: WLL).


What:Williams Companies (NYSE: WMB) slipped more than 15% this week.

So What:Key driver: Credit downgrades and merger concernsWilliams credit was downgraded by Moodys and Fitch this weekThese downgrades pushed its credit rating into junk territory


Now What:Making matters worse, reports surfaced that suggested the Williams merger with Energy Transfer Equity was looking shakyKey takeaway: Investors are gravely concerned that Williams deal will fall apart, leaving it a much weaker stand-alone entity


What:Seadrill (NYSE: SDRL) sank 18% this week.

So What:Key driver: Seadrills market outlook and analyst downgradesSeadrill CEO Per Wulff said this week that market conditions could remain challenging through 2017


Now What:Meanwhile, analysts were harsh:Cowen slashed Seadrills price target from $8 to $3 J.P. Morgan analysts said that Seadrill will require "major evasive action" to avoid covenant breaches in 2016 or 2017Key takeaway: Investors and analysts just dont see any reason to own Seadrill


What:Chesapeake Energy (NYSE: CHK) slumped 22% this week.

So What:Key driver: Debt concerns and a downgradeOne of Chesapeake Energys bonds fell to just $0.29 on the dollarThat price shows grave concern from the market about the companys ability to pay back its debt


Now What:Meanwhile, analysts from Guggenheim slashed its 2016 outlook on the company, expecting it to lose $0.59 per share, which is $0.05 per share worse than its previous outlookKey takeaway: Investors and analysts are worried that Chesapeake Energy isnt going to make it through this downturn


What:Whiting Petroleum (NYSE: WLL) fell more than 26% this week.

So What:Key driver: Two analyst downgradesMorgan Stanley downgraded Whiting from equal weight to underweight, while reducing its price target from $23 to $4


Now What:UBS downgraded Whiting from buy to neutral, and slashed its price target from $19 to $7Meanwhile, Barrington gave up covering the entire energy sector, including Whiting, saying that it was just too speculative to recommend oil stocks right nowKey takeaway: Analysts are getting fed up with the continued drop in crude and its impact on companies like Whiting


What:Denbury Resources (NYSE: DNR) slumped more than 26% this week.

So What:Key driver: Trouble with its bond exchangeDenbury Resources proposed bond exchange is getting push back from bondholders


Now What:The company was forced to sweeten the deal to fix some loopholesKey takeaway: The fact that the company needs to pursue a bond exchange deal has investors worried that its financially stressed


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