Turley Muller

Chesapeake Bites McLendon

lea-"CHK bought tons of Haynesville acreage at inflated prices. "

No, CHK sold a bunch of haynesville acreage at inflated prices. CHK sold 20% of its leaseholds there what it cost them to purchase the 80%. Essentially, the sale paid for what they bought. 5-6x more that what they paid.

CHK is fine. They will have to slow down on growth until gas prices rise a bit, and acquiring credit is no a concern. But, they don't need credit to operate. Most of the costs associated with producing wells have been paid for, the gas flowing from wellhead to utilities is very high margin and generates tons of cash.

Chesapeake Energy: Truckin', Like the Do-Dah Man

I;m thinking that CHK is hesitant to load up on debt even though it avoids shareholder dilution. Equity financing and asset sales provide cash with out increasing debt levels, which may allow CHK to cut back on hedging.

If debt levels are high, one would want to be well hedged no matter how strong the market, NG prices collapse, interest payments remain, and a firm could be wiped out quick. With the up trend in NG, I would think CHK would like to remove some hedges to take advantage of rising prices

Chesapeake: A Top Energy Play

I think there is some resistance to LNG imports. The US does receive small amounts of LNG imports, but there are significant security issues. From my understanding, much of the off-loading occurs offshore.

If a LNG tanker exploded in harbor, the destruction would reach far in-land. Thus, there are worries of LNG tankers being terrorist targets.

I would think if LNG shipments really caught on, there would be additional costs incurred for the security aspects would would add to LNG prices. I think drilling will be the answer for the near future.

Chesapeake Energy: Why Are Analysts Consistently Off the Mark?

mush-

Good question. I would bet the CEO knows better than the market. Possibly a reason CHk has underperformed - it took on lots of debt convertible PS and there has been lots of dilution. NG trended down last year too. CHK concentrated on acquiring land instead of production past couple years- when gas was falling and land was cheaper. CHK has moved out of the acquisition phase to the asset monetization or production phase.


Aubrey's opinion is that the stock usually moves sideways for a long time, then will break out and move up to a much higher range and then move sideways for awhile. I guess similar to AMZN price history. But, he thinks CHK is on the next leg up .

Chesapeake Energy: Why Are Analysts Consistently Off the Mark?

swim-

I have been hearing that the investment banks & guarantors who underwrite, securitize, and place the muni paper financing construction are adverse to coal fueled plants. They recommend NG, because the fear of coming legislation and regulation on carbon emissions could significantly increase production costs.

Article

{ Three of the nation's biggest investment banks have introduced an unprecedented set of lending guidelines that could make it harder for energy companies to get financing for coal-fired power plants........... "What you've got is Wall Street now saying there are risks involved with investing in new coal plants," said Dale Bryk, senior attorney at the Natural Resources Defense Council.......Power generated with natural gas is already sold at a premium. In Florida, for example, where five coal projects have been derailed in the last year, Barry Moline, the executive director of the Florida Municipal Electric Association, looks at Tallahassee’s municipal utility as an indicator of the future.]

Demand for NG is sure to increase propping up prices.