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Chatos
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Personal investor for more than 30 years, learned a lot, made some money lost some, never stop learning
  • CHKR - Chesapeake Granite Wash Trust - Downfall Or Salvation  2 comments
    May 2, 2012 4:08 AM | about stocks: CHKR

    Ok CHK's quarterly results where less than good, and the shares of CHK that had gained more than 6 % today are now down as much in the aftermarket, but what about CHKR ?

    Well the shares have lost from their high of near US$ 40 to about 24 and change today which would still give a nice yield of close to 12% and here is the question !

    What is the next distribution going to be ?

    Check this out :

    CHKR shares went public in November at 19 than paid their first distribution at 58c - keeping in mind the price for natural gas which makes more than 60 % of the income of CHKR fell from Nov.2011 to December 13 by about 23 % - than next payout was on February 15 with 73c and again natural gas was down about 30 % - now I do not know how but the distribution of CHKR seems to go up with falling gas prices, how very wonderful !!

    :-) !!

    It seems that someone in the company has a magic wand to turn falling gas prices into higher profits,.. so nice !!

    And given that gas prices have again fallen by 25 % + I would assume that the next distribution in May should be 1US$ or better ?

    And than so many adults do no longer believe in fairy tales - the tooth fairy or miracles -

    :-)

    In my very humble opinion something does not seem right here

    what do you think ?

    yours truly

    Chatos

    Disclosure: I am long CHKR.

    Additional disclosure: I am long CHKR and I am expecting further downside once distributions fall with the falling gas price,

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  • hheist
    , contributor
    Comments (4) | Send Message
     
    Hi Chatos,

     

    CHKR target distribution for the 1st quarter 2012 is $0.74 according to their initial prospectus. For reference, they targeted $0.68 in Q4 2011 and exceeded that with the $0.73 payout. This increase in distributions is due to the fact that new oil wells are still being drilled so as more producing wells come online the distribution increases dramatically in what is termed the "ramp up" period. This increase in production far outaces the impact of a decrease in dry natural gas prices especially as only about 20% of the distribution comes from dry natural gas revenues.

     

    Natural gas prices have much less to do with the distributions totals as CHKR is 80% oil and natural gas liquids (which track more w/ oil prices and for their last distro received $43 per mbbl of natural gas liquids). Dry natural gas accounts for about 20% of the distributions by revenue though I would agree that % should decrease for the next 1-2 months (distributions are for prices ~60 days in the past) until we get through the lowest NG prices of about $2 a few weeks ago. I still expect the distribution this quarter to be a bit higher than the targeted amount but not substantially so, similar to last quarter.

     

    I am also long CHKR and hoping for continued ramp up in distributions and have been buying more on this recent pullback.

     

    Thanks,
    Heath
    3 May 2012, 01:56 AM Reply Like
  • Gcleeper
    , contributor
    Comments (11) | Send Message
     
    CHKR hedges its future gas production. Often at price higher than the price of gas during the dividend period.
    10 May 2012, 02:41 PM Reply Like
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