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The bad news just keeps rolling in for Chesapeake Energy (CHK), with sources saying that in the...

The bad news just keeps rolling in for Chesapeake Energy (CHK), with sources saying that in the weeks before CEO Aubrey McClendon was stripped of his chairmanship, he arranged an additional $450M loan from a longtime backer which was simultaneously arranging a $1.25B round of financing for Chesapeake itself.
Comments (15)
  • Chatos
    , contributor
    Comments (6) | Send Message
     
    I think this is actually good news, as it will open CHK for a buyout EXON should be very interested to acquire these excellent assets
    9 May 2012, 05:56 AM Reply Like
  • Energysystems
    , contributor
    Comments (1227) | Send Message
     
    I doubt that Exxon will go after it. They've so far been burned with their acquisition of XTO, just b/c of the drop in NG price. But there are others out there. I just got into CHKM, I think they are a bit insulated from the issues, and hold solid assets(pipelines from the wells to the 3rd party pipelines). Plus, they have right of first refusal on anything CHK sells, and they have a very small debt load.
    9 May 2012, 08:12 AM Reply Like
  • jake7
    , contributor
    Comments (31) | Send Message
     
    CHK pocket board has no shame.....expect these self dealing
    stories to continue to drip...drip...drip out. Only near term
    solution is put the entire company on the auction block.
    9 May 2012, 08:46 AM Reply Like
  • metalmark
    , contributor
    Comments (24) | Send Message
     
    Does it matter now? In other words,if you "rode it out" this long, you have to hope prices spike, [turn off the flippin' valves] or Exxon or someone solid comes in. No matter what the board has done, or McClendon, those are still fantastic assets and some of us own them. There's nothing that is going to get my money back but a buyout and higher prices. Who knows, maybe I'm wrong and Aubrey has another miracle to pull off. Lord knows I hope so.
    Remember that bumper sticker, "Friends shouldn't let friends drive drunk?" It should have read"Professional Investors shouldn't let amateurs invest in the market." This is what happens when you are home recovering from a major surgery for 10 months and start reading up on things and then decide to "dip your toe" in the water and then you decide, "ah, what the heck, lets dive all in!" Hey, it's only money, right?
    9 May 2012, 11:09 AM Reply Like
  • wald22
    , contributor
    Comments (188) | Send Message
     
    let's get to the point = Average gas well produces 2.4BCF of natural gas at $2= $4.8M worth. On average it costs them $9M to drill and maintain that well to produce that $4.8M. Take $4.8M of total return, minus total cost of $9M= how much profit?? IN the USA a negative becomes a positive in accounting. To keep going, the company needs to borrow ever more. GET IT!!~!!!
    9 May 2012, 11:54 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    When it comes to drilling wells you can't "average" out costs or returns (same thing with real estate). When you are dealing with real estate there are 100 different factors that go into the cost of drilling that well and the revenues they produce. You need property specific details in order to make a logical educated assumption of the costs and revenues.

     

    Your example looks like that of a dry well. CHK is aggressively drilling for liquids these days, and curbing their dry gas. In addition to Oil and NG that comes out, so does a bunch of other stuff, methane, etc. Some is captured and sold some burned off.

     

    Some companies say they need $6 NG prices to be profitable, where CHK says they need around $3.

     

    What I get is that there is not enough specific information to make an educated opinion about the profitability of any particular well. At least that's my opinion based on what I've been able to dig up (and I have aggressively been becoming smart on CHK over the last year).
    9 May 2012, 03:50 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    I just took a peek at the wells drilled (and their interests) in 2009, a total of 2206 gross wells (1103 net wells). They reported that it cost $3.380B in expenses. Now this is oversimplification, but if you take the total cost, and divide by the total wells that year, on average, it cost around $$1.5M for each well, based on gross wells (and $3.3M for net wells). As I state above you really can't rely on averages in these particular situations. You can see how my example based on actual wells and their associated costs is significantly different. Numbers can be crunched in a lot of different ways to support the different assertions by different people.
    9 May 2012, 04:08 PM Reply Like
  • NatGasMaverick
    , contributor
    Comments (521) | Send Message
     
    I'm actually embarassed for CHK employees. What's more, I got a call from a HH a couple weeks back for a new Director level role at CHK. It would be a pretty good gig had it (1) not been in OK City, and (2) not at CHK.
    9 May 2012, 12:02 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    This is just total BS..Reuters should be embarrassed for reporting this old crap over and over and over again.

     

    Seriously is this the best you can really do?

     

    How about something that's actually a material event?
    9 May 2012, 01:36 PM Reply Like
  • No Sympathy
    , contributor
    Comments (35) | Send Message
     
    This is not about reporting. This is an agenda. Payback for Aubrey's open letter to Obama, perhaps? A new method of crucifixion i.e. EPA method of operations? A way to discredit the industry so as to justify more regulation and prohibit private land oil & gas development? It is a national election year after all, and these stories do not pass the smell test.
    9 May 2012, 09:16 PM Reply Like
  • NatGasMaverick
    , contributor
    Comments (521) | Send Message
     
    Chicago politics at its finest? perhaps. CHK should pay attention to their bankers and the rating agencies.
    10 May 2012, 09:13 AM Reply Like
  • wald22
    , contributor
    Comments (188) | Send Message
     
    May I ask where are the fantastic assets??? CHK is now what the housing boom was. CHK is trying to make money by flipping propertiese. In other words, the way up was kind of good, and now the way down is not good. 2/3's of their wells are uneconomic. If you lump all of the new wells together that are less then 2 years old, they can't make a profit on them. The problem here is hard to explain, but I will try anyway. Too much debt has driven paper assets to artificial, non economic levels. We are in for a long period of downward repricing of inflated assets just like Japan experienced for the last 25 years. And just like them, our debt levels keep increasing, for it is the only thing keeping the system from imploding. To me we are coping with 30 year debt cycle that has started to crack. I beleive Greece is wittnessing a breakdown of the Treasury market today and we will have the same problem soon. One can not borrow out of debt. Neither can CHK or anyone else. I see two options = default or devalue. I think we will get a combination of both. CHK will never cash flow its drilling by production.
    9 May 2012, 03:21 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    are you talking about the economy or CHK?

     

    I agree that no one can borrow out of debt. I just don't see CHK doing what you say. They are paying down their debt, ahead of schedule.

     

    they do have assets, CHK Total Assets are $45.59Bhttp://ycharts....

     

    Add in the debt to equity ratiohttp://ycharts.co...
    and you can see that it (d2e ratio) has been falling at a fairly steady pace.

     

    Current liabilities are around $26.7B.

     

    Hey I'm I Ron Paul 2012 fan, I get what is really happening in the world. I'm just not sold that CHK is in a similar position. I still have more research to do on the leases on their wells, the expiration etc. but overall I just don't see the distress in the numbers or operations that everyone talks about.
    9 May 2012, 03:42 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    I would like to point out that I have noticed a significant increase in operating expenses, which make me nervous. I would highly recommend to CHK that they find out why and begin reducing that level. Revenues in 2008 were similar to 2011 but op expenses nearly doubled (if my memory serves me correctly).

     

    This is an issue that needs to be addressed immediately. I did given credit to the shareholders suing over aircraft (personal) use. I do not think that the BOD or anyone should be using corporate aircrafts for personal use, disclosed perk or not. Their salaries (without other compensation) are high enough where they can afford to fly first class if they wanted (for their personal use).

     

    If the stock price continued up for the last four years, i might say, ya ok, i get how it makes you more productive, making me more money, but this isn't the case.
    9 May 2012, 03:57 PM Reply Like
  • Harry Johnson
    , contributor
    Comments (482) | Send Message
     
    Think I said some of this before somewhere on SE, but maybe it bears repeating.

     

    I charted some of CHK's stats that it seemed nobody looked at from 2003 through 2008. The 2008 results compared to 2003 were as follows:

     

    Ave. Daily Production-Mcfe per net well..................... Down 25 %

     

    Increase from prior yr per net well drilled- MMcfe......Down 60 %

     

    Average cost per net well drilled.................. UP 222 %

     

    Cost of net production increase- $ per Mcfe.............Up 560 %

     

    G & A expense - $ per Mcfe produced................. Up 500 %

     

    Production expense - $ per Mcfe produced.............. Up 206 %

     

    CHK's reported PV@10% of proved reserves less LTD; minus Market Cap.
    2003................... Positive $ 2.5 Billion (undervalued)

     

    2008.................. Negative $ 12.4 Billion (for going concern value, undeveloped acreage, and/or overvalued.)

     

    Such things are far more important than the financial reporting schemes dreamed up by the Financial Accounting Standards Board, the SEC and their fellow travelers to keep investors informed.

     

    Haven't looked at these tea leaves since 2008, with the exception of average daily production per net well, which in 2011 was about half of what it was in 2003.
    9 May 2012, 04:46 PM Reply Like
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