Mmarrkk

Chesapeake Energy Called the Market's Bluff

First, the author needs to get a grip on his "CHK lost money on their hedges" conclusion. That is so much bull cr*p. These are paper losses on marked-to-market...a nuance of stupid financial accounting. They did not lose money on the hedges. Repeat after me: no losses. They only gave up the option to make MORE money, they didn't lose money. The financial accounting lala land (as opposed to cash accounting and cashflow) show it as a loss but they didn't.

Second: jjason, if you want anyone to take you seriously as an investor, you need to drop the Obama/Biden crap. That just shows you don't have a clue and are drawn to empty promises. I'll take that comment back if you can list for me 2 accomplishments that Obama is responsible for. Actual things he has done that has resulted in anything! And don't bring that "hope" and "change" baloney. Tell me about a bill he passed. Tell me about a program he administered, led, or showed any EXECUTIVE MANAGEMENT experience. Without that, your opinion is forever tainted as it shows you can be led by the nose with nothing but an empty suit and some cute words.

Third: CHK is a long term play and a great one. Don't be misled...gas prices will be stuck in a range of $6-10. They can't go much lower as it will result in the stoppage of drilling and an abrupt drop in supply. When they go too high, storage gets full and price drops. At those prices, CHK will make huge money, regardless of the costs alluded to by a few posters. CHK is spending roughly $2-3/mmcf to find and develop the gas. They are getting paid $6-10/mmcf. Hmmm, sounds like a good deal. A huge percentage of their gas costs $1/mmcf to produce. Yeah, looks like a bad business deal!

And, BP has bought in to 25% of one of their big plays. I can tell you that Aubrey got lots of leverage in that deal because everyone wants in on his plays/acreage so he is able to negotiate really sweet deals. Look at the Plains deal...Plains paid $1.7 billion for 30-40% and then will also pay all of CHK's drilling costs for the first $1.5 billion. But CHK retains their production revenue for their share. Now that's leverage!

If it goes to $40, buy a boat load.