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And now to the rescue: Chesapeake Energy (CHK) says it's gotten a $3B unsecured loan from...

And now to the rescue: Chesapeake Energy (CHK) says it's gotten a $3B unsecured loan from Goldman Sachs and Jefferies Group, to be repaid from those 2012 asset sales.
Comments (109)
  • madeinclay
    , contributor
    Comments (4) | Send Message
     
    Is there a way to find out what the terms were for this loan?
    11 May 2012, 07:26 PM Reply Like
  • Jason Aycock
    , contributor
    Comments (113) | Send Message
     
    This much from clicking through:
    "The new facility, which ranks pari passu to Chesapeake's outstanding senior notes, matures on December 2, 2017 and may be repaid at any time this year without penalty at par value and carries an initial variable annual interest rate through December 31, 2012 of LIBOR plus 7.0%, which is currently 8.5%, given the 1.5% LIBOR floor in the loan agreement. During the remainder of the year, Chesapeake plans to complete asset sales totaling $9.0-$11.5 billion and intends to use a portion of the proceeds from these asset sales to repay the loan. Chesapeake has received strong interest from prospective buyers of its Permian Basin asset sales process and its Mississippi Lime joint venture process, and the company expects to complete these two transactions in the 2012 third quarter. "
    11 May 2012, 07:33 PM Reply Like
  • Jason Aycock
    , contributor
    Comments (113) | Send Message
     
    And more info likely to come on an 8:30 a.m. conference call Monday
    11 May 2012, 07:34 PM Reply Like
  • IncomeYield
    , contributor
    Comments (2277) | Send Message
     
    an ambulance chaser that finally beat WarrenB to the scene of an accident
    12 May 2012, 11:23 AM Reply Like
  • Choosh
    , contributor
    Comments (400) | Send Message
     
    First lol on this site.
    12 May 2012, 01:45 PM Reply Like
  • richardx
    , contributor
    Comments (122) | Send Message
     
    Cheseapeake stockholder value decrease with every sale. Best way out of this mess is to hope EXXON is in a buying mood.
    11 May 2012, 07:37 PM Reply Like
  • Wall Street Smart
    , contributor
    Comments (474) | Send Message
     
    The equity might have nothing left in a month. With the debt (Balance sheet and hidden) near 20 bn some one might offer to buy the company for that amount post bankcrupcy. This has been like a thriller movie with new twists and turns everyday.
    11 May 2012, 07:59 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    DOJ would never let Exxon buy CHK. The combination would produce 20% of the natural gas in the US. The only thing ppl hate more than big banks is big oil.
    11 May 2012, 09:06 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    The value of their property and equipment alone is reported at $68.5B (before accumulated depreciation, depletion and amortization...) Total Net 40B, Long term debt $20B, $16.5B in shareholder equity. (as of March 31, 2012, when share prices were $23)

     

    And as ShipOfFools points out, their off balance sheet assets are fairly large.
    11 May 2012, 09:06 PM Reply Like
  • bdoeden
    , contributor
    , CHK PRO Alerts subscriber
    Comments (63) | Send Message
     
    This shows your ignorance. A sale of assets reduces both the asset balance and the loan balance at the same time so stockholder equity stays the same.

     

    I have never seen so much ignorance about CHK's business as has been displayed on these pages recently. Do you people actually buy stock without knowing what you are investing in?

     

    For your info CHK has been selling assets that are unneeded in the future. They are holding on to assets where they will be either #1 or #2 in the various fields they are retaining. Since CHK was early in securing leases in these prime fields they bought these leases for hundreds of dollars and they are now worth thousands of dollars. THIS COMPANY HAS HUGE ASSETS! After all they just got a 3 BILLION UNSECURED LOAN so Goldman and Jefferies must think they are good for it.

     

    Most of you are overlooking the deal of the year. Go buy that inflated Facebook offering (which I wouldn't touch). I'm adding substantially to my CHK position because they have the assets.

     

    BTW, this company was built by Aubrey and Ward. Ward has left to build up another company (SD). How many of you have taken $50,000 and built it into the #2 producer of natural gas with increasing quantities of crude. I have no problem with Aubrey's founders program or his loans. He has made me a lot of money over the 10 years I've been investing in this company and I'm confident that the payoff will be richer in the future.

     

    Bob Doeden
    11 May 2012, 11:56 PM Reply Like
  • nScout
    , contributor
    Comments (189) | Send Message
     
    Good luck with an over leveraged company producing an over produced commodity, showing a declining if not negative profitability and teeming with conflicts of interest.
    12 May 2012, 05:04 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    you obviously do not understand how cash flows work. Dont buy too much chk, they lack the funding to meet their business plans for the next 18 months
    12 May 2012, 06:09 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    Bravo Bob, thanks for your very insightful feedback. These people have already tried and beheaded CHK in the court of public opinion.

     

    I feel like half the time I'm talking to the wall.
    12 May 2012, 09:24 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    when others are fearful be greedy!
    12 May 2012, 09:24 AM Reply Like
  • tiger8896
    , contributor
    Comments (636) | Send Message
     
    You can't be serious, no problem with the founders program or McClendon's loans. If Aubrey wanted to treat CHK like his personal piggy bank, he should have kept the company private.

     

    And if I were you, since you were one of the lucky ones to be invested when it was a <$10 stock, I would be selling before it makes the round trip back below <$10.
    12 May 2012, 10:05 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    If they have "huge assets", they could rescue themselves. It's obvious they are on their deathbed.

     

    If you want to tear up, and applaud McClendon as some sort of oil & gas hero, that's your business. I'll send you a CHK t-shirt, just don't wear it around in town, might anger the locals.

     

    Here are the ice cold facts: (the ONLY thing people remember)

     

    Chesapeake Energy Corporation has a Free Cash Flow of -3.175B, (clean your eyeglasses, and read it again) -3.175 BILLION USD

     

    AND..... a crappy little Mkt Cap of UNDER $10 Bil USD, ($9.818 Bil USD) hardly a success story.

     

    more bad news includes:

     

    1 Month Stock Returns -26.20%
    Year to Date Stock Returns -33.51%
    1 Year Stock Returns -52.07%
    3 Year Stock Returns -33.81%
    52 Week High 35.75
    52 Week Low 16.35

     

    Still want to tell us how great they are? People are lining up to jump out the window on this, c'mon.

     

    GS doesn't offer you a $3 Bil USD Unsecured Loan, unless they smell blood in the water. That is their model, it never deviates.

     

    It's not about saving CHK, it's about what's on the backside for GS.
    12 May 2012, 10:15 AM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Why would you trust a company that depends so heavily on off balance sheet deals?

     

    This company is facing collapsing revenues in its core business and selling assets at fair value will be impossible given that the buyers know the company is over-leveraged.

     

    Any company that depends on creative financing is likely to get destroyed at some point.

     

    And corporate governance has been a downright disgrace.

     

    It looks closer to a short than a buy ...
    12 May 2012, 10:18 AM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Right, the early investors in Enron and Worldcom said the same thing.
    12 May 2012, 10:18 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    I don't have a problem with the FWPP or his personal loans, just like I don't care about your personal loans.

     

    Yes there were some conflicts of interest 4 years ago, but not like it never happens, just look at green mountain today. He was wrong about the maps, he had to buy them back, he shouldn't have leveraged his wells on his stock (he paid dearly for that trade, and the 100M bonus, didn't do much to make up for the nearly 1B in losses).

     

    Yes he should have kept the company private, I would be willing to bet that he has a certain amount of regret, but going public assisted with the critical mass needed to grow the company to the #2 producer in America.
    12 May 2012, 10:20 AM Reply Like
  • bdoeden
    , contributor
    , CHK PRO Alerts subscriber
    Comments (63) | Send Message
     
    There is never any luck with my investments. I work at it 8 hours a day 7 days a week. Its the lazy ones here that rely on headlines, tips, the stars, rumors etc that are crying now.

     

    I don't understand why it is so hard to see that the founders drilling program was in our best interest. If Aubrey has skin in the game he is going to make sure that he has the best people selecting the drilling sites. After all he has to pay 2.5% of the drilling cost.

     

    I recognize that Aubrey was not perfect but if you had a normal buttoned down manager running this company it would most likely be one of a thousand small E & P's instead of being a giant in finding oil & gas. Recognize talent when you see it and overlook the nickle & dimes.

     

    Bob Doeden
    12 May 2012, 10:54 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    Definition of 'Free Cash Flow - FCF' -http://bit.ly/M6Psd6

     

    "It is important to note that negative free cash flow is not bad in itself. If free cash flow is negative, it could be a sign that a company is making large investments. If these investments earn a high return, the strategy has the potential to pay off in the long run."

     

    Please take into consideration the huge investment adding liquids to the company and the rising/normalizing of NG prices. If negative free cash flow was happening for a considerable amount of time, then I might worry a little more.
    12 May 2012, 11:16 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    then all Oil & NG companies better watch out, this practice is hardly uncommon.
    12 May 2012, 11:17 AM Reply Like
  • Choosh
    , contributor
    Comments (400) | Send Message
     
    Look up moral hazard in the dictionary.

     

    Are you so amoral with respect to ethics as long as you're getting your cut?
    12 May 2012, 01:51 PM Reply Like
  • richardx
    , contributor
    Comments (122) | Send Message
     
    When the sellerof assets NEEDS MONEY NOW, the assets that will be bought will be the best not the worst. We are not talking about buyers with no intelligence.
    12 May 2012, 08:18 PM Reply Like
  • bigazul
    , contributor
    Comments (1026) | Send Message
     
    There seems to be some off balance sheet liabilities also.
    13 May 2012, 09:53 AM Reply Like
  • bigazul
    , contributor
    Comments (1026) | Send Message
     
    You seem pretty emotionally attached to this company. Have you ridden the thing all the way down? Goldman gave a nice loan, they did not buy equity in the company.

     

    I'm just not willing to bet on this company in its current state.
    13 May 2012, 10:03 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    That SD chart looks an awful lot like the "not yet trading" Facebook chart don't you think?
    13 May 2012, 11:28 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    Is Bob Doeden an anagram for Aubrey Mclendon?
    13 May 2012, 11:30 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    really? what other names you got?
    13 May 2012, 11:31 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    "and in bankruptcy they go ahead of the bond and equity holders" for claims on assets yes, yes?
    13 May 2012, 11:32 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    http://bit.ly/JwXQ2h

     

    http://bit.ly/J8IK4g

     

    The Volumetric Production Payments - An Effective Monetization Strategy at the IPAA Private Capital Conference in 2006 by Paul Riddle is a great resource for not only companies that participate but projections, estimates and reasons to use VPP over straight asset sales. (have to google it, its a pdf)

     

    GMX - http://bit.ly/JwXTek

     

    Valero - http://bit.ly/J8IK4m

     

    KCS - http://prn.to/JwXTem

     

    CHK - http://bit.ly/J8IL8s

     

    Pioneer PXD - http://bit.ly/JwXQ2n

     

    SPV and UBS - http://1.usa.gov/J8IK4s (letter from the Federal Reserve RE VPP)

     

    Great article on tax advantages and benefits http://bit.ly/JwXTep

     

    Goldcorp (2 VPPs) 29% $997M
    Lundin Mining (2 VPPs) 20% $162M
    Glencore Int. AG 28% $285M
    European Goldfields 27% $58M
    Farallon Resources 15% $80M
    Aurcana Corporation 30% $25M
    Alexco Resources 25% $50M
    FNX Mining 20% $400M
    Redcorp Ventures 15% $90M
    First Uranium Corp. 13% $125M
    Silvercrest Mines 20% $12M
    Luna Gold Corp. 17% $17.8M
    Source: Surge Capital http://bit.ly/J8IK4u

     

    just to name a few
    13 May 2012, 11:58 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    My Walker,

     

    I understand what Free Cash Flow means (had to look that up, huh?), and hardly need your subordinate "real estate tutelage" to quantify any remarks I make pertaining to the financial industry. I hope we are clear on that point, if we have any questions about housing, we defer those questions to you, agreed?

     

    You boldly remarked that:

     

    "If cash flow is negative it may be a sign a company is making investments? If negative free cash flow was happening for a considerable amount of time, then I might worry a little more."

     

    1) Why then the push to dump $10 Bil USD in assets then?

     

    2) The SEC has launched an informal inquiry, and the IRS is examining the well participation program, that doesn't happen for fun.

     

    3) Debt is off the charts, prompting the asset sale. Been to any Shareholder Meetings? This has been argued about at great length recently.

     

    4) As reported, the main problem: Chesapeake will be “sharply cash flow negative over the next three years” as it increases capex spending, forcing it to depend on more asset sales and monetizations that present a rising risk.

     

    Fitch estimates that a $10 billion gap between cash flow from operations and capital spending and leasehold acquisitions will put pressure on the company’s credit quality. Operating cash flow for the quarter was just $910 million given weak natural gas prices, according to Fitch. Thus, capital spending and leasehold acquisitions pushed long-term debt up 23% to $13 billion.
    Chesapeake also raised its capex guidance for well costs and for acquisitions of unproved properties, while increasing the projected level of asset sales. “The inventory of assets to sell is deep (Permian Basin, Mississippi Lime, Eagle Ford VPP, Chesapeake Oilfield Services IPO), but the extent of sales raises questions about the ability to execute on all of these transactions in such a short time frame, and the potential impact that sales could have on core operations and medium term growth prospects,” read the release.

     

    Shares in Chesapeake have been on a downward path for at least 12 months. That decline accelerated around mid-March. That has been happening for a "considerable amount of time", so GET WORRIED.

     

    This is a short in progress, most in our industry agree.

     

    Good luck in your sector, wish you all the best.
    13 May 2012, 12:32 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    Dr. V,

     

    I have no doubt that you have a crystal clear understanding of Free Cash Flow, given your extensive credentials and industry participation. For the less sophisticated and down to earth investors, I thought I would just point out that negative cash flow in and of itself is not a bad thing. No need to get all uppity regarding my background, and your comments show you know very little about the niche health care real estate brokerage industry. Valuing the business is the primary function of a health care broker. Yes we also perform the function of a real estate broker, but the primary function is an analysis and valuation of the business. (multiple owner, JVs, RIDEA structures, sale lease backs, distressed real estate sales) the majority of my consulting has been with Chapter 7 & 11, and bank directed asset (business & real estate) sales. I then get to watch new buyers turn the business around and make a huge profit. Yes my knowledge in the Oil and Gas Industry is limited as I only began really following a few years ago. And no, not agreed. I will say what I want when I want, and if I am wrong, I will eat those words.

     

    In response to your questions/statements.

     

    1) the asset monitization has been a big part of CHK, and they are a leader in VPP. It has contributed to their incredible growth. Also, the lowest NG prices of all time aren't helping. the company has had to be nimble and resourceful to continue to grow and position for the future, which has proven more difficult than they thought.

     

    2) The SEC and IRS have both been working with CHK for years, regarding a variety of issues (VPP, FWPP, Accounting Methods, etc.)

     

    3) Debt is a bit high yes, I wouldn't call approx. 60% off the charts (I wonder what you think of US debt levels). Yes it has been debated quite a bit in recent months, and CHK has done a great job so far tackling that problem. they are ahead of their debt reduction schedule. (at least before these deferred asset sales , which we wont know more about until tomorrow morning).

     

    4) I am not sure I remember that report claiming they will be cash flow negative for three years (that seems like it might have been based on NG prices remaining depressed). I personally think we will see prices much higher in the next few years. Yes the path to reduce debt has changed in recent days, but nothing definitive was stated. They have just adjusted guidance. It is still yet to be seen how the rest of the year actually plays out. CHK could take several significant steps to turn the Titanic , if you will.

     

    The downward path is what initially put this stock on my radar, after watching, and researching, and researching more, I tried to determine if there was a value play, and thought that was around 17-19. I think there is one here, based on my current countless hours researching this company. Some companies can turn these situations around, some can't, and as of right now, I still think CHK can. I'm more worried about the debt issue after 2015-2016, when the majority comes due.

     

    Thanks but I don't operate on luck, it all comes down to how hard/smart you work.

     

    Let me be clear my comments mean no disrespect, however yours really toed over the line. I like to think of Seeking Alpha as a place we can all learn and share info, not just puff our chests.

     

    I appreciate your opinions and will take them into consideration for my investment strategy.

     

    W
    13 May 2012, 01:32 PM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    Mr. Walker, no offense taken.

     

    However, I wasn't puffing my chest. I was rather reacting to the fact you actually included an explanation of Free Cash Flow, in an attempt to discredit my opposing view. My people call that Chutzpah.

     

    Let's forget us, here though.

     

    Facts remain:

     

    1 Month Stock Returns -26.20%
    Year to Date Stock Returns -33.51%
    1 Year Stock Returns -52.07%
    3 Year Stock Returns -33.81%
    52 Week High 35.75
    52 Week Low 16.35

     

    CHK will roll over and sink, already listing at this point.

     

    Don't believe me? Call Goldman Sachs and ask them.

     

    That position (CHK fail) will be made available to a top tier of investors before the end of the week, took the call myself Friday night.

     

    I will be the old guy in the background surrounded by others, giving me high fives.
    14 May 2012, 03:32 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    http://bit.ly/JNsmX9

     

    Start here.
    14 May 2012, 03:42 AM Reply Like
  • zebra114
    , contributor
    Comments (251) | Send Message
     
    If you look at the 10K ( I think that's where I read it), he never really bought the maps back and is appealing that now in court.
    14 May 2012, 08:13 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    Oh my....

     

    Carl Ichan gets a call from Goldman Sachs on Friday night to take a chunk out of CHK's behind, gee didn't I just mention calls went out?

     

    Guess what Carl "da King" Ichan will do now?

     

    He doesn't save companies, his entire reputation was built on breaking up, and/or selling off various parts of the companies he invests in.

     

    Looks like Carl is getting ready to hold Court again.
    14 May 2012, 09:19 AM Reply Like
  • WPSPIKER
    , contributor
    Comments (1158) | Send Message
     
    You are partly right he does get rid of the dead weight in companies and hopefully the BOD will be the first to go. Your link above is good, how most if not all major commodities brokers/speculators see by the end of 2012 that Nat Gas will be above $4/mbtu which will help balance out the cost/well. at worst the company reserves valuation is seen in the 26~34/share range. so at the prices seen we are ~50% below fair market value of the company. This is where I'm sure Ican will be stating how he will help and what it might cost. the 3B from GS is a way to get the proven reserves out of the ground so that is good, they are probably getting something more than we know of at the moment just like BH Buffet does favorable future returns to get over the bump bears are tossing at the company.

     

    the BS VPP well program is very old news and Recruiters and many bears are touting like it is something no one knew about. The loans CEO took out to pay his part of the VPP 2.5% of the wells are no secret either well costs need tp be paid up front, so he had to barrow $ to pay his part.

     

    Then the Enron stuff, nothing there either Enron was closer to UNG than CHK as far as how things worked enron was all buy energy at spot prices and reselling it they had nothing under them acreage wells production or reserves nothing other than paper volumes... just BEAR bs propaganda from all I can see.

     

    Mark
    14 May 2012, 09:36 AM Reply Like
  • alphagabby
    , contributor
    Comments (573) | Send Message
     
    Mr. Walker ~
    Your comments show reserve and respect. You set a good example.
    Thank you for your courteous remarks.
    14 May 2012, 10:46 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    Same thing he did last time?

     

    http://bit.ly/J4C6NA

     

    14 May 2012, 11:47 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    Partly right?

     

    FACTS:

     

    1) Ichan got the call Friday, as I said.
    2) I mentioned Ichan's penchant for busting things up for sale, a widely known fact.
    3) He is indeed getting ready for an event, as I said.

     

    SUMMARY: 3 for 3 pal, that's more than partly right.

     

    - The $3 Bil USD short term loan is exactly that, only covering daily operational costs.

     

    - I agree with you, NatGas will likely see $5 USD by end of August.

     

    - Southeastern, Chesapeake's largest shareholder with a 13.6 percent stake, is turning activist and recommending that the company's board be open to a sale.

     

    Please knock the article all you want, I didn't write it.

     

    Direct this critique at the author.
    15 May 2012, 02:40 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    Facts remain:

     

    1 Month Stock Returns -26.20%
    Year to Date Stock Returns -33.51%
    1 Year Stock Returns -52.07%
    3 Year Stock Returns -33.81%
    52 Week High 35.75
    52 Week Low 16.35

     

    CHK will roll over and sink, already listing at this point.

     

    Call Goldman Sachs and ask them.
    16 May 2012, 01:52 AM Reply Like
  • billiejones
    , contributor
    Comments (167) | Send Message
     
    I think its worth pointing out that Icahn purchased the COMMON. If Icahn believed that "CHK will roll over and sink" as you assert.....then Icahn would have taken the "distress for control" route and purchased the fulcrum debt. He didn't, he purchased the common.... meaning he sees value. Icahn does indeed have a reputation for breaking companies up.....what does that matter for common shareholders who bought near the recent lows? These investors will make money along with Icahn in a breakup and sale.
    16 Jun 2012, 11:13 AM Reply Like
  • ShipOfFools
    , contributor
    Comments (15) | Send Message
     
    This should once and for all stop the Shorts in their tracks. Goldman Sachs knows that the assets of CHK are real and hold tremendous value.....talk to Statoil and CNOOC.....the $10 billion that will be sold (permian basin) will allow CHK to focus on the Utica....where there may be $25 to $30 Billion in reserves....and that is an "OFF BALANCE SHEET ASSET"....in other words it's not listed at any value....but anyone that knows about the energy industry knows that the Utica will be the single biggest discovery in the US probably in the last 35 years!!!
    11 May 2012, 07:58 PM Reply Like
  • Gigem77
    , contributor
    Comments (1373) | Send Message
     
    Well said, but the shorts are fully engaged and will continue to misrepresent the value of CHK. Carl and I were on the buy today in pyramid fashion with 80% of our purchases below 15. That's why the price was moving up 40-50 cents per tick. The 52 wk low is in. ;)
    11 May 2012, 08:10 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    I bought more as well, below the $15 mark :-)
    11 May 2012, 08:48 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    You mean the Goldman Sachs that helped finance Greek debt?

     

    Two red flags for an investor in an individual stock is poor corporate governance and reliance on creative financing. I can think of other examples of creative off the balance sheet financing, including subprime mortgages and Enron.

     

    I think to invest in this company is to assume disproportionate risk.

     

    The collapse in the price of natural gas will induce industry consolidation and CHK looks like one of the 'consolidated', not a consolidator.
    12 May 2012, 10:18 AM Reply Like
  • richardx
    , contributor
    Comments (122) | Send Message
     
    Like you confidence when you say he depending on Utice which MAY be 25-30 billion - especially the word MAY.
    12 May 2012, 08:24 PM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    Exactly, GS smelled blood in the water, like Satan being selected as Treasurer for a Charity Fundraiser.

     

    In December, 2012 was being touted as the "year of M&A activity among Oil and Gas E&P's", so this comes as no surprise. CHK had to be sat down and smacked.

     

    CHK, as desperate as they are, didn't see it coming.

     

    McClendon? Country / Western version of Madoff, nothing more.

     

    Like trusting your double-jointed Supermodel girlfriend to travel alone, (flying for the first time ever), to be in a Victoria's Secret Fashion Show at a Viagra Conference in Las Vegas, yeah right.

     

    Who ya gonna trust, huh?

     

    NOBODY.
    16 May 2012, 03:13 AM Reply Like
  • ShipOfFools
    , contributor
    Comments (15) | Send Message
     
    If you are Short CHK tonight your weekend is ruined. Last time I checked Goldman isn't giving anything away....their research team knows exactly what CHK's asset base is and the risk that is at hand.....Breakup value is still above $50.00
    11 May 2012, 08:31 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    I'd hardly say an emergency $3 billion loan announced on a Friday night is a cause to celebrate if you are long. That's 1/3 of CHK's market cap, as of the close.
    11 May 2012, 09:07 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    no premium for it being from Goldman and Jefferies?
    11 May 2012, 09:14 PM Reply Like
  • untrusting investor
    , contributor
    Comments (9973) | Send Message
     
    It might provide a ST bounce, but doubt the decline is anywhere near over. Probably would have been better to buy ATM calls if one thinks the slide is over.
    11 May 2012, 09:16 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    Im guessing both firms are either working with CHK on the asset sales, or trying to elbow in to work on them later. Goldman was mentioned in an article as having made personal loans to McClendon, so maybe they are trying to protect their investment there. Goldman is also a lead underwriter of CHK's upcoming Oilfield Services IPO. Investment banks don't do anything without a reason, so you better believe theres something else going on.
    11 May 2012, 09:34 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Goldman Sachs has made mistakes before. It may very well be a case of throwing good money after bad.

     

    Would GS have done this deal if CHK did not owe GS a lot of money?

     

    Very doubtful.

     

    I think this company could be a short. It's difficult to make a decision because the financing is not transparent. But the lack of transparence is usually conscious decision by a company to hide from the market excessive leverage.
    12 May 2012, 10:18 AM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Goldman and Jeffries may end up owning the company, but that means there will be nothing left for you as a shareholder.
    12 May 2012, 10:18 AM Reply Like
  • bdoeden
    , contributor
    , CHK PRO Alerts subscriber
    Comments (63) | Send Message
     
    Why does 1/3 of Chk's market cap have any relevance except that Goldman sees the assets are there that would support such an UNSECURED LOAN.

     

    Your comments further indicate you don't know what you are talking about!

     

    Bob Doeden
    12 May 2012, 11:02 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    Since the unsecured loan still gets preference over shareholders of common stock in a bankruptcy, I'd say its relevant.
    12 May 2012, 01:09 PM Reply Like
  • richardx
    , contributor
    Comments (122) | Send Message
     
    So does KKR who bought into CHK a short while back. They only want the expected NG in later years and will wind up selling a portion of their shares to another driller down the pike.
    12 May 2012, 08:27 PM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    "if their investment is going south so is mine" thesis. doesn't sound bad to me...
    13 May 2012, 11:35 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    They (GS) gave him a taste of blood, now he must become their little vampire.

     

    Stand in the middle of the street and wait for cars.

     

    Yes, Master!
    16 May 2012, 03:12 AM Reply Like
  • Black Gold
    , contributor
    Comments (664) | Send Message
     
    They just keep digging the hole deeper. I've got an article coming out about their cash flow gap and extravagant capex program whenever SA approves it.

     

    Even with asset sales I'm sure they will still be cashflow negative. Their planned capex for 2012 is 11.6 to 13.1B. Cash from ops is a piddly 1.1B. Asset monetizations aren't going to cover that balance.

     

    They just took $3B in senior FIVE year notes at a floor of 8.5% to refinance a revolver that is at the max fed funds +1.75%. In February 2012 they were able to place seven year notes for 6.775%. That should tell you something about the deterioration of their credit worthiness and what lenders think.
    11 May 2012, 10:08 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    the 10-Q MGMT Discussion & Analysis http://bit.ly/M5l9U5

     

    Capital Expenditures

     

    "In the Current Quarter, our capital expenditures for exploration, development and acquisition activities, net of drilling and completion carries, were $3.471 billion, including $2.503 billion for drilling and completion costs and $968 million for acquisitions of unproved properties. A disproportionately high percentage of our total budgeted 2012 capital expenditures was made early in the year, and this was the result of several factors which are discussed further below. Our current budget for 2012 includes drilling and completion capital expenditures, net of drilling and completion carries, of $7.5 – $8.0 billion and net undeveloped leasehold expenditures of $1.6 billion."
    11 May 2012, 10:19 PM Reply Like
  • Black Gold
    , contributor
    Comments (664) | Send Message
     
    Keep reading....

     

    "During the Current Quarter, our capital expenditures related to our midstream, oilfield services and other assets were approximately $770 million. Our projected 2012 and 2013 capital expenditures are $2.5 –$3.5 billion and $2.0 – $2.5 billion, respectively"

     

    7.5+1.6+2.5=11.6
    8.0+1.6+3.5=13.1
    11 May 2012, 10:26 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    that is for 2012 AND 2013

     

    Also, we know the transition to liquid is going to cost a bit more up front. The revenues and eventually operating cash flow will rise once the transition is further along.

     

    Not to mention rising of NG prices
    11 May 2012, 10:38 PM Reply Like
  • Black Gold
    , contributor
    Comments (664) | Send Message
     
    Ok let me spell it out one more time for you:

     

    "Our current budget for 2012 includes drilling and completion capital expenditures, net of drilling and completion carries, of $7.5 – $8.0 billion and net undeveloped leasehold expenditures of $1.6 billion."

     

    "During the Current Quarter, our capital expenditures related to our midstream, oilfield services and other assets were approximately $770 million. Our projected 2012 and 2013 capital expenditures are $2.5 –$3.5 billion and $2.0 – $2.5 billion, RESPECTIVELY"

     

    LOW END RANGE: $7.5B D&C + $1.6B LAND + $2.5B MOO = $11.6B CAPEX

     

    HIGH END RANGE: $8.0B D&C + $1.6B LAND + $3.5B MOO = $13.1B CAPEX
    11 May 2012, 10:42 PM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    Oh yes i see what you did. I wasn't really questioning your math.

     

    Sorry its been a 15+ hour day and the last 4 have been spent reading this freaking 10-Q and crunching numbers.

     

    Although the capex expenditures are hardly a surprise.

     

    The scaled back asset sales are from (i believe) $14B down to $9B.

     

    Just saying, I don't think it's quite as depressing as you make it sound. The disproportionate Q1 expenditures helps to explain the miss in earnings. I anticipate this won't be a problem in Q2-4.
    11 May 2012, 10:51 PM Reply Like
  • auto44
    , contributor
    Comments (3171) | Send Message
     
    Advise to Mr McClendon which he didn't ask for and doesn't need. Stay the course,and ignore all the negativity. You built a huge nat gas company. Most of your detractors never built anything but overblown rumors and innuendo and a pack of fools are feeding on it like chickens in a hen house going after a bleeding bird. Gee maybe they will all flock to Jamie Diamond now. (forgive me if the name is not spelled correctly) A little difficulty and now this hero's name is rapidly becoming mud.
    11 May 2012, 10:37 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    Without asset sales they run out of cash. He cant ignore that, neither can you
    12 May 2012, 06:10 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    Asset Sales are a huge part of their business, and has been for quite sometime. You brush them aside like they shouldn't matter or happen. Keep in mind as well, they don't always "sell" the whole asset. Often times they just sell a portion retaining a portion for CHK and they have rights to drill and pump the wells. On top of that, these contracts are (to the best of my knowledge) nonrecourse. So if that particular well stops producing in the future, CHK isn't liable to give them NG from another pump or pay them cash. Additionally, the cap ex expenditures are hardly a surprise, we knew this for a while.

     

    A lot of people here totally disregard the growth from the switch to liquid. CHK is a little behind the game compared to SD when it comes to liquid, but SD doents't have that many wells or interests. You give no credit to the value of their assets.

     

    As far as subprime, my take is that CHKs BOD and CEO are being sued over (in part) "favorable loan terms." I am certain they needed to have terms that would not cause anyone to think that CHK was being favored etc. This credit line is in addition to the $5B (collective) thats it already has. Plus the Goldman credit line can be paid back at anytime without penalty.

     

    When you compare current home rates, treasury rates etc, yes 8.5% looks a little high. But how many Americans can even get a 8.5% interest rate? This isn't subprime, it's more like proper lending for a very short term, unsecured credit line.

     

    12 May 2012, 09:21 AM Reply Like
  • richardx
    , contributor
    Comments (122) | Send Message
     
    And HOW is SD these days??
    12 May 2012, 08:30 PM Reply Like
  • Hillbilly Stock Star
    , contributor
    Comments (741) | Send Message
     
    Maybe GS can push the Picken's Plan!
    11 May 2012, 10:43 PM Reply Like
  • jake7
    , contributor
    Comments (31) | Send Message
     
    Afraid this board is a wee bit slow to get their arms around all
    that is going on...could be simply a mental problem or possibly
    trying to save their own asses at our expense
    11 May 2012, 11:13 PM Reply Like
  • Maui Investor
    , contributor
    Comments (4) | Send Message
     
    Good points, Investor1111. An interest rate of LIBOR plus 7%, currently 8.5%, means that GS sees this as a subprime deal. CHK must have had a hard time getting lenders to step to the plate on a loan or line at a cheaper rate. As a point of reference, this is like someone getting turned down by a bank and having to borrow money from a PayDay loan company.
    12 May 2012, 03:52 AM Reply Like
  • Black Gold
    , contributor
    Comments (664) | Send Message
     
    Lenders have already cut back the limits on the revolvers for their Midstream and Oilservices division.

     

    They are just simply running out of ways to raise money. They've VPP'd and JV'd just about every play they have. I think they are going to have trouble selling the permian for what they want for it as well. They have said it is 5% of their reserves which equals about 1 tcfe. Even if you make it all oil that is reserves of 167MM barrels. It's obviously not all oil and even if it was and you pay a whopping $50/bbl in the ground, you get $8B. If you add that to the $3B I think they could get from the VPP/JV. That gets them roughly around cashflow neutral depending on capex, but it kills one of their large oily areas thus further hurting their cashflow.

     

    Their Western region (which includes the Permian) last quarter made 13.9 bcf of gas and 3.1 MMbbl of liquids (pretty ridiculous that this company STILL isn't breaking out oil/NGLs, there's a reason for that) for a total of 9% of their production. Since they said Permian is 5% of their production in bcfe (only 5% because they produce so much nat gas other places), obviously the Western region just isn't Permian, but its the best data we have. The Western region contributes 30% of their current liquid production and you can bet the Permian contributes a large portion of that.

     

    You can also see from the realized prices that the Western division is where most of their oil is. $87/bbl vs mid $60s for the other regions. Obviously with WTI around $100, those other areas are heavily weighted towards NGL.

     

    Seems to me like this is selling the golden goose.
    12 May 2012, 10:21 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    and would you argue "this is consequence of the price falling and significant speculations in the space"?
    13 May 2012, 11:37 AM Reply Like
  • texaswiz says
    , contributor
    Comments (65) | Send Message
     
    A what point do you stop buying up land, leases and putting rigs out there to drill for a commodity that has been over supplied for years now and is in declining value. Debt is debt folks, it never goes away and just keeps eating away at the principal. At some point we need to stop this madness that has been perpetuated by an out of control board of directors and a less than sane CEO and just hope some body with deep pockets can come in and buy this company out before we investors ride it down to squat.
    12 May 2012, 09:42 AM Reply Like
  • W. Walker Jr.
    , contributor
    Comments (271) | Send Message
     
    Leverage is how the rich get richer. Keep in mind the majority of the debt the company has doesn't come due until after 2015.

     

    NG prices can't go much lower, electric usage is on the rise and projected to increase 21% in 2012 (due to lower cost pf NG over coal). http://bit.ly/I5XkZL

     

    You underestimate the future value of NG, and the usage increases that will occur in the long term. Once we are able to make Liquid NG cheaper, you will see US exports skyrocket.

     

    The Board isn't out of control, but I think they are over compensated, and have recently sent a letter to the board. I touch upon operating expenses, BOD compensation and the letter to Obama.

     

    I request the BOD and Aubrey give up any performance based compensation this year, and return any from last year. I also ask they give a sacrificial lamb (someone is going have to step down to calm public opinion, I don't care who, just someone). I ask for stock buyback (although the lack of funds makes this a small problem). I ask for all company employees to cease any private use of company assets. I ask for Aubrey to apologize and retract his letter to Obama (right or wrong, I think this is where the real problem started).

     

    Just a few of these things would do wonders to calm shareholders, as well as nonshareholders. Yes there are things they can do to alleviate some of the pain we have all recently felt, I do not think there are any conflict of interest, I do not believe most the media hype. I do believe there is some agenda against CHK, just not sure who or why (possibly the letter to Obama).
    12 May 2012, 10:00 AM Reply Like
  • Choosh
    , contributor
    Comments (400) | Send Message
     
    A potential buyer would do well to wait until they can assess the magnitude of the class action suits that are coming.
    12 May 2012, 02:00 PM Reply Like
  • Choosh
    , contributor
    Comments (400) | Send Message
     
    Right, leverage, other people's money, and timing. Too bad about the last one.
    12 May 2012, 02:04 PM Reply Like
  • lydizzy
    , contributor
    Comments (10) | Send Message
     
    I was wondering when the lawyers would come in ?.....
    12 May 2012, 04:53 PM Reply Like
  • wald22
    , contributor
    Comments (188) | Send Message
     
    1- Like most natural gas producers, CHK is suffering from low prices, and will have to reduce the estimated value of propertiese. Like 50%.
    2- The gap between expenses and income is widening. Thus they are forced to borrow from tomorrow to fund the gap today. Drilling $8M wells to produce $4M worth of gas is not profitable. By using volumetric production payments (VPP) they have been able to bring in income today that has to be produced in the future. Again this is a form of borrowing from tomorrow. Just because the payments are payable in fuel production of the future does not mean it won't cost them nothing.
    3- Betting to generate better short term results have a tendacy to end up taking from the long term. In other words CHK shareholders value decreases with every sale or part sale. CHK is full of what I call part sales (%). And that makes it a lot harder to sell. It is only a matter of time before CHK has to go to GS to sell big parts of its holdings, which will reduce the seize of the company and stake the CHK shareholders own. This is where CHKM, CHKR, TOT, and others will have to step in and buy what best fits them.
    4- If I was CHK I would do a reverse split on the common shares to finance 100% ownership of everything that is needed to drill to keep the committments to CHKM, CHKR, TOT and others. Sell the leases. Scale down now before they are forced to. This is no longer about saving CHK, it is about saving CHKR and CHKM and others that have paid up front for a percentage of production.
    12 May 2012, 09:55 AM Reply Like
  • Dr. V
    , contributor
    Comments (1179) | Send Message
     
    Facts remain:

     

    1 Month Stock Returns -26.20%
    Year to Date Stock Returns -33.51%
    1 Year Stock Returns -52.07%
    3 Year Stock Returns -33.81%
    52 Week High 35.75
    52 Week Low 16.35
    16 May 2012, 03:12 AM Reply Like
  • bdoeden
    , contributor
    , CHK PRO Alerts subscriber
    Comments (63) | Send Message
     
    2 additional points:

     

    1) While CHK has been under a bear attack the future price of June NG has risen from about 1.91 to 2.50.

     

    2) The cap ex budget is not written in stone. Lets assume for argument that CHK is squeezed (an argument I reject) they could easily defer more drilling until prices rebound taking the pressure off.

     

    The doom & gloomers here are making a major mistake in their investment career. This is a major opportunity to increase your net worth. How much are you risking at these prices when you really look at the assets that CHK holds. Why are major energy companies investing billions with CHK ? They are paying billions for only a portion of CHK's assets. Surely the remaining portions that CHK is keeping for itself have a worth comparable to what they received from those energy companies. They have sold leases for 4-5,000 in the near past that they paid only hundreds of dollars for. The remaining leases have not dropped that much in value even though NG has dropped in price.

     

    Remember that commodity prices are self correcting. Low prices begat reduction in supply which brings prices back to normal.

     

    Bob Doeden
    12 May 2012, 11:33 AM Reply Like
  • tiger8896
    , contributor
    Comments (636) | Send Message
     
    I'll agree that CHK's biggest problem has been plummeting NG prices but Aubrey has to go. Let him make up for his 2008 stock losses at that Heritage Energy fund he operates and not at CHK, with his sweetheart deals and 100M bonuses.

     

    I don't know that the GS loan announcement will lift the stock but firing McClendon will get the stock above $20.
    12 May 2012, 12:22 PM Reply Like
  • ShipOfFools
    , contributor
    Comments (15) | Send Message
     
    If you are CNOOC do you really care what the next CHK packaged sale will cost? After all isn't the CHK technology in Shale drilling and exploiting exactly what the Chinese want so they can duplicate it in their own country?? Not to mention they will own a chunk of our last chance gasp at energy I dependence which the very word independence is enough to make the selling price palatable to them at any price
    12 May 2012, 12:00 PM Reply Like
  • Black Gold
    , contributor
    Comments (664) | Send Message
     
    Exactly. The Chinese are not after these deals for economics. They want the knowledge to take back home and the ability to convert their massive USD reserves into hard assets and not US debt. This is where folks go wrong valuing these assets. Just because someone will overpay for part of an asset doesn't mean the rest of it is worth that. CHK tries to market their company to investors in this way. "Well someone bought some of our acreage for $20,000 an acre, that must mean we can apply that to all of the acreage we have" One of their presentations has Eagle Ford acreage valuation listed as high as $50,000 an acre. It's laughable. On 320 acre spacing and $100/bbl you'd have to sell 160,000 bbl of oil just to cover land costs. It's a joke.
    12 May 2012, 12:42 PM Reply Like
  • slimback
    , contributor
    Comments (358) | Send Message
     
    Black Gold, excellent post.
    14 May 2012, 03:22 PM Reply Like
  • wald22
    , contributor
    Comments (188) | Send Message
     
    @bdoeden - Yes prices for natural gas have increased. But I just have this gut feeling they will be below $1 this fall. What is pushed up tends to come down. Yes their budget is not written in stone. But they can't defer drilling, unless they let lease acerage expire. They have already decided to let a lot of lease acerage expire. The companies that have become partners with CHK need to realize that they can't depend on CHK to hold up their end of the deal. They are going to get hurt as CHK goes down.

     

    To me CHK has the same problem as the US Government has. They can't face economic reality. The reality is that financial resources are limited. We operate on a credit system. That credit system of creditism is failing do to lack of cash. You simply can't pay a credit with more credit. Only cash can do that. And cash can not enter into the system in debt free form. It has to be borrowed into existence. JPM/C trade was a bet on the direction of loan making out of credit creation. So far they lost $2B and the losses will continue. It took time to make and build up that trade and it will take twice as long to get out. To unwind that bet right now would force JPM/C to take a much bigger loss now instead of spreading it out. CHK made a bet on natural gas on borrowed money. The debt is still there, but the value of natural gas is not. And there lies the problem. Can they accept defeat and let the gas lease acerage expire?, (instead of drilling to hold by production). The next problem they will encounter is falling crude oil and liquid natural gas prices. It is like getting body slamed by the mad dog meshan. As I see it the shorters will drive the stock up the next few days and then slam it into the ground. For investors, it depends on what you want to be. If you are a client of GS you are a muppet. CHK is a GS muppet. If you nare a shareholder GS has another name, a 5 letter word I can't disclose here with the c missing. CHK is not the only stock getting body slamed in the stock market. Plunder has become a way of life on Wall Street. We now have the legal system that authorizes it, and a moral code that glorifies it. And that is why GS has that 5 letter word with the c missing to describe shareholders.
    12 May 2012, 01:14 PM Reply Like
  • Matthew Lewis
    , contributor
    Comments (378) | Send Message
     
    An emergency $3 billion dollar senior loan on a Friday night at 8.5% interest rate and the equity holders are happy? Goldman knows what they are doing, that doesn't mean your equity will be worth anything at the end of the day though.
    12 May 2012, 01:57 PM Reply Like
  • TippingPoint
    , contributor
    Comments (156) | Send Message
     
    Good point. A loan like that sounds like it's anticipating at least the possibility of an equity wipe out. What a mess.
    12 May 2012, 06:07 PM Reply Like
  • wald22
    , contributor
    Comments (188) | Send Message
     
    Under creditism, inflation is the increase in credit supply. Deflation is the decrease in credit supply that follows inflation. The economy has to contract if deflation takes hold. QE is now a debt instrument used by the FED to create the credit out of thin air to buy the unpayable debt with. Thus they will hold ever more debt that cost them nothing. They will own that debt and give us stupid people just enough credit to keep making the payments to them. Matthew Lewis said something above that made me do a little checking. Guess who is short big time on CHK. Guess who loaned them the money. That loan has to be paid before shareholders will ever see a dime. CHK made mistakes, but the system has failed them like it has failed us. Cash is what pays debt. Credit can't pay debt. Weather we like it or not, we have been conquered by a banking system that now controls the government. If CHK had any honesty at all, they would go to the shareholders and say, lend us the money we need at 8% and we will back it with collateral. But then we shareholders are a 5 letter word with the c missing. People will leave the market until respect and honesty returns. Until then we will see CHK at a $1 or less just like BAC or F just a few years ago.
    12 May 2012, 09:02 PM Reply Like
  • AxiosCap
    , contributor
    Comments (291) | Send Message
     
    All of these posts and not one comment about potential impairment of assets? Anyone look at their filing and wonder how their O&G properties saw a 4+% incr in valuation over the last qtr while nat gas prices plummeted and crude was flat? Or the huge increase in DTAs? Or LT Debt up ~20% QoQ? The negative FCF is just part of the problem. Ppl saying it doesn't matter don't understand how upstream businesses work. Can you have an E&P biz without CapEx? What about the fact that CHK has zero hedges on for their gas and they are selling at market prices? We haven't even gotten around to talking about potential off balance sheet items yet to be discovered and based on what we've learned in the last month you have to think they are there. This is not a healthy business right now.

     

    Opening what is a line of credit from GS at a variable 8.5% rate is not necessarily a good thing. People KNOW that CHK is having not just problems but HUGE problems. Do you think CHK has ANY leverage in sale negotiations? Of course not -potential buyers will bleed them for as long as they can. With gas prices at $2 and not heading much higher any time soon, no one is in a huge hurry to buy their assets.
    12 May 2012, 11:54 PM Reply Like
  • jglinski
    , contributor
    Comment (1) | Send Message
     
    Why do so many people think that Goldman has good intentions with this "unsecured" loan? It is not going to be unsecured, it is going to be secured by shorting the stock, buying puts, selling calls, and everything else they can do to drive down the share price. I wouldn't be surprised if the loan is actually the hedge to a massive short position and also buys them a seat at the table when CHK gets broken up just before bankruptcy. Goldman is looking out for Goldman, not for CHK shareholders.
    13 May 2012, 02:27 AM Reply Like
  • Burden
    , contributor
    Comments (149) | Send Message
     
    Right now, the easiest way to look at this is to try and determine whether you think CHK is going bankrupt or not. In my view, they are not for a number of reasons that have been articulated in earlier posts. As an investor, the best way to invest in the thesis that they will not go bankrupt is to sell the Jan 5 puts, which I did two weeks and did again on Friday. I have also already sold the MAy 11, 12, and 13 puts, as well as June 10 puts and July 8s. The premium for these puts has been terrific, obvioulsy due to the tremendous bearish sentiment out there, which has, in my view, led put buyers into paying an unreasonably high price to place their bearish bets. At the end of the day, there are too many things that can be done to avoid bankruptcy.
    13 May 2012, 07:47 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    I cant believe the premium on those Jan puts is that high. $0.55 for the $5 put seems like an expensive way to speculate for a bankruptcy. There's a lot of smart money predicting CHK will not make it through the year.
    13 May 2012, 11:38 AM Reply Like
  • Matthew Lewis
    , contributor
    Comments (378) | Send Message
     
    That premium is nuts....
    13 May 2012, 05:15 PM Reply Like
  • Julius Ferraro
    , contributor
    Comments (495) | Send Message
     
    the $7 octobers are almost 10% of the asset at that price. I might as well sell my shares and bet on them that way
    13 May 2012, 05:50 PM Reply Like
  • wald22
    , contributor
    Comments (188) | Send Message
     
    I have to agree with jglinski above. Goldman's loan buys them a seat at CHK's table when CHK gets broken up. If you have a business that only works with credit for its operational working capital, because shareholders have been screwed to oblivian, then it is not a business, its a company in trouble. Businesses should look to their shareholders first and formost, not banks and part owners (partners). Banks and partners will always get first lien on property. CHK has screwed itself with the use of bank or partner creditism to undercut shareholders. They should have given shareholders first lien on everything. Now CHK along with its partners, be it CHKM, CHKR, CHK.PD, TOT, GIP and many others who are depending on CHK are going to get hurt.

     

    What people fail to realize is that creditism undercuts capitalism. Creditism is the road to communism, and under communism, debt deflation destroys debt. Once the value of debt is destroyed, capitalism gets a fresh start. CHK managment has destroyed shareholder value by selling it to banksters who now have first lien on everything. There is no longer any shareholder equity. A big portion of their leases will expire worthless in the next 5 years, unless they can drill and hold by production. To do that they need $10B a year. Screwed shareholders have no way to help the company. The only option they have is to sell before all is lost.
    13 May 2012, 10:49 AM Reply Like
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    excellent thread!
    13 May 2012, 11:41 AM Reply Like
  • WPSPIKER
    , contributor
    Comments (1158) | Send Message
     
    The biggest problem facing (CHK) going forward is capex spending needs, the real thing behind it is the fact that most if not all of the properties have already been paid for but JV and part sales of 25 to 33% of the property. So if some leases are left to expire there wont be a great loss to chk. as far as th 9B from GS well that will help pay drilling & costs for lines/fracking exc. Other than more issues with CEO and spineless asleep Board and possible off balance issues that NO ONE can find or prove at this point..
    Note I'm long CHK & gasfrack

     

    Mark
    13 May 2012, 10:03 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    Reports out that Carl Icahn has taken a large stake in CHK. Given the plunge into the close Friday, I'd have to say he's in the red. Icahn was in and out of CHK pretty quickly last time. Article is from the WSJ.
    13 May 2012, 10:22 PM Reply Like
  • slimback
    , contributor
    Comments (358) | Send Message
     
    Carl Icahn can't squeeze any more oil and gas out of non economic wells than Chesapeake and Halliburton can. The root of CHK's problem is production revenue does not begin to cover the cost of wells drilled. Its that simple.
    14 May 2012, 07:53 AM Reply Like
  • ShipOfFools
    , contributor
    Comments (15) | Send Message
     
    Please look into the wells that CHK is hitting in the UTICA. This is the game changer the company needs. It's the single greatest discovery in the US in the last 35 years. Look at the production of the wells coming on.....and who has the largest acreage position?? Yes...it's CHK. And it's worth $30-40 Billion. Icahn knows value when he sees it.
    14 May 2012, 09:55 AM Reply Like
  • slimback
    , contributor
    Comments (358) | Send Message
     
    ShipOfFools, Go long, go long.
    14 May 2012, 11:19 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    Icahn knows that there are enough desperate longs and a weak BOD to give him control of the board for half of what he sold shares for 18 months ago. He's not an expert on drilling, hes an expert on kicking out bad managers, making himself a ton of money, and moving on.
    14 May 2012, 12:35 PM Reply Like
  • wald22
    , contributor
    Comments (188) | Send Message
     
    @Mike Maher - Agree with you about making money for himself. But this time it is going to be a little different. He is going to put the company in play and use his resources to help another company he already owns shares in to buy up part of CHK. He already knows that CHK production revenues do not cover the cost of the wells drilled or that are going to be drilled. He is going to replace the BOD to save the best parts and let the rest go. He is going to downseize CHK, by parting it out.
    14 May 2012, 10:05 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2661) | Send Message
     
    I dont think he owns shares in any other E&P companies. According to insidermonkey he owns El Paso but thats being purchased by KMP. The cash flow problem is so large I'm not sure how much Icahn can do. It takes time to run a proxy fight, time to shop assets, and time to consummate a merger. Reports are out that other companies are lowballing CHK for the assets they are trying to sell, hence the need for Friday's loan. Why should companies buy in the open market what they could go after in bankruptcy court?

     

    The only reason I dont have puts in CHK is because the premium is too high. To me, the options market is pricing in a wipeout of the equity.
    14 May 2012, 10:56 PM Reply Like
  • wald22
    , contributor
    Comments (188) | Send Message
     
    @W.Walker Jr. I have to agree that in the past the rich got richer on leverage. After all leverage is such a beutiful animal -- until it bites you in the ass. CHK had a lot of leased acerage valued at $10,000 an acre or more. They lowered it to $5,000 and found no bidders. Then they lowered it to $1250 and got some bids if and only if they would take stock instead of cash. The only cash bids they have is at $625. That is still more then what they paid, but the problem is the bidders only want a small part of the acerage, not the whole thing. So now they are forced to drop the leases, and dropping them they are. Saudi Arabia just recently told the USA that they will be forced to curtail oil exports and replace those exports with liquid natural gas made from dry gas they have been flaring. Saudi Arabia has much more dry gas then we have. It is just a matter of liquifing it.
    17 Jun 2012, 01:55 PM Reply Like
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