Analysts are divided on Chesapeake's (CHK) plan to sell its midstream assets for ~$4B. The deals...

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richardx Comments (122)
 
There goes another asset that was holding this boat afloat. Thought Aubrey had some sense but I think he let his position go to his head and needs to be reined in not fired. He (himself) is an asset that is worth millions if not billions to this company's value and I as a holder would like to see him become a hound for the company.
8 Jun 2012, 07:01 PM Reply Like

153972 Comments (475)
 
So, let me get this straight: analysts, market mavens, etc., have been clamoring for CHK to sell assets and reduce cap ex and CHK executes such a deal without sacrificing any wet gas or oily fields and this is supposed to be a negative?
8 Jun 2012, 07:29 PM Reply Like

westelk Comments (129)
 
Some need to spend less time listening to AM brag about his vast acreage, and more time in the details in the SEC reports.
year free cash flow
2007 -2.02 billion
2008 -12.6 billion
2009 -3.37 billion
2010 -8.68 billion
2011 -2.93 billion
2012 -3.26 billion (Q1 only)

What did this enormous use of funds get? Lots of acreage which must be drilled AND produced or the assets (leaseholds) expire and become worthless. The landowner then becomes free to sell a lease to XYZ company which might actually drill and produce the well giving the landowner his desired income stream. Nothing pisses a landowner off more than having the guy down the road benefit from a producing well while CHK sits idle on his lease.

The analogy of buying calls and have them expire worthless if not exercised or sold might clarify CHK's difficulties--a lease expiring in 2012 doesn't have the value of a lease expiring in 2016. One of the ways out is to raise enough cash to either drill AND produce the leases, or PAY to have the lease extended (like rolling over calls), assuming the landowner wants to continue dealing with CHK.
8 Jun 2012, 08:11 PM Reply Like

Steve Doering Comments (11)
 
What a stupid article. These Midstream assets are on the books of CHK for $2.4 Billion. Additionally, CHK foregoes $3.0 Billion in Capex for Midstream over the next 3 years and the author of this article complains it is going to cost CHK $200 Million per year versus keeping these assets.

So, CHK gets $4 Billion now ( $3.4 Billion after tax) and reduces Capex by $1 Billion per year and it is a bad deal. Yeah right.

I'd have to say this is the best asset to sell for CHK. Now they can act like other E&P's and focus on drilling.
8 Jun 2012, 08:40 PM Reply Like

egmjpb Comments (25)
 
Buy CHK
8 Jun 2012, 11:06 PM Reply Like

wald22 Comments (131)
 
Yes CHK will forgoe $3Billion in Midstream Capex spending. But that spending is absolutely necessary to bring future production online. I can not beleive they are so stupid as to save their financial ass at present only to kill it in the future. They must know by now that the pool of fools willing to overpay for unproven reserves has dried up. Their manufacturd model myth that all acerage is created equal is false. Their 15.5 tcf gas reserves will have to be written down to 7 tcf. The idea to buy up all available lease acres once there is an inclination of a possible commercial play and then sell it to a fool is over. Rince and repeat has stopped working.
9 Jun 2012, 02:13 PM Reply Like

Steve Doering Comments (11)
 
Wald: I agree the $3 Billion in future infrasructure is critical. GIP is buying existing Midstream assets from CHK and building required future infrastructure for them. Future production will come online as scheduled. CHK will focus on drilling while GIP will build the pipelines and gathering systems.
10 Jun 2012, 10:47 AM Reply Like

Ramon59 Comment (1)
 
I am a private investor without much risk in the market at this time. Upon retirement from the Army, I became a stock and commodity broker with EF Hutton and Dean Witter. I am now retired.
11 Jun 2012, 03:26 AM Reply Like