BrotherMaynard

Plenty of Natural Gas: Exploration and Production Companies Keep Increasing Oversupply

excellent point about shut-in storage -- it should be considered inventory. the future supply problem b/c of lower rig counts is overblown. that's why curve flattening should be the next stage of this cycle.

just to expand on the EOG comment, stephen schork today:

"several Northeast pipelines started issuing operational flow orders (OFOs) in an apparent attempt to limit shippers exceeding their contractual limits...In addition to the Labor Day holiday, last week’s report also comprised the ratchet clause rollover. Injection ratchet clauses in the East require shippers to inject working gas through scheduled stages in order to preserve operational integrity. By September 01st no more than 80% of storage can be filled....According to the latest estimate from the EIA, maximum storage capacity in the East is 2.178 Tcf. As of two reports ago, week ended August 28th, estimated storage was 1.78 Tcf. That calculation was already 81½% of capacity or 1½ points above the ratchet. In other words, storage in the East over the last two reports was at operational capacity. Thus, the OFOs were a likely means to hold storage below the 80% threshold...What’s so bullish about that? Absolutely nothing."


here's the rest of schorks note: www.cnbc.com/id/327973...

Boone Pickens Puts His Money Where His Mouth Is on Energy

i don't see how you can divine any information from tbp's picks given that he has so many ulterior motives...who knows if the fund is just another marketing scheme? After all, a 98% loss is roughly the return most advertising companies get on their marketing dollars...

T. Boone Pickens' Hedge Fund Concentrates on Energy, Drops Basic Materials

how'd that energy fund work out for pickens in 2008?

whats that, you say...-95%?

amazing that warren buffett gets routinely thrown under the bus for his financials yet t boone pickens is praised as if he's some sort of luminary when it comes to investing in anything. way to go on that -95% return, t boone. oh yeah...and well done on prop 10.

Natural Gas: Could This Be the First Bullish Chart?

"Guy Adami of fast money who is very savvy said UNG is aplay here"

in all of his savviness did he bother to mention that ung is trading at a 15% premium to NAV?

That's in addition to the fact that ung owners are already are paying a negative roll yield (fyi...12 month nat futures spread is almost a 1 bagger...finance.yahoo.com/q/fc...).

ung is a mess - it almost reminds me of that guy at the end of robocop 1 that crawls out of the cesspool only to be made instant road kill by that speeding paddy wagon.

see more here: ftalphaville.ft.com/bl.../

Staley Cates on Chesapeake CEO Compensation

i'm trying to imagine warren buffett or charlie munger defending this pay package and i can't help but laught to myself.

Chesapeake Energy: Peaking for Now?

"Who to say that XOM or some other cash rich company won't swoop CHK up?"

Rex Tillerson, XOM's CEO, will actually say it: “There’s still a lot of settling out on valuations that has to happen,” Tillerson said. “I’m not sure the valuations have all settled out yet.”

www.bloomberg.com/apps...

My Problem with Chesapeake Energy's New Deal

"9-10% per year is pretty darned good these days!"

Keep in mind the notes were seniors (though, few can really borrow at reasonable rates with anything less than senior)

"Bro: CHK's bankruptcy potential is highly over rated. Looking at the value of the underlying assets - I'd say they are safe"

Still, I'd like to see CHK IR release some sort of stress test scenario showing what happens to their capital structure at $3 and $4 nat gas.

My Problem with Chesapeake Energy's New Deal

"The market wants them to "really" live within cash flow. I don’t think they want to believe that."

Excellent point. I think its a symptom of an ideologically driven CEO/management. This sort of denial is absolutely devastating for shareholders. Steve Jobs (i'm long aapl), John Mackey (WFMI), Bernie Ebbers, Sandy Weill are/were all ideologues...denying what needed to be done, in favor of what they wanted to be done...all at the expense of shareholders.

BBG reported that CHK was a bankruptcy risk

www.bloomberg.com/apps...

It uses the Z-score methodology and, like any model, can't capture the entire essence of what makes a business tick.

either way, what i'm annoyed about is how mcclendon won't elaborate on what happens to the PnL and balance sheet if these nat gas prices persist or even reach 2002 levels. Yes, we know eventually supply/demand must balance, but the fact that he isn't candid about the potential for lower prices and refuses to plan more than a few quarters ahead, is disconcerting, to say the least.

no position

Chesapeake Energy Unable to Rally Even After Positive News

RE: the first two comments

Never take advise from people that drop ad hominems and react with emotion. both of those traits have no business with investing.

CHK has some serious issues if nat gas continues its downtrend. Sub $5 and $4 start to inhibit the effectiveness of hedges. We're in the midst of the worst economic recession in decades. Keep in mind nat gas fell into the $2 rage during the last recession. And that recession wasn't even consumer led. Industrial production falloff is already muting the effects of the colder winter, coupled with serial overproduction by e&P's, like CHK, will mean heavy oversupply and much lower prices are inevitable. CHK also has debt covs that get triggered at certain ebitda/debt ratios...with lower prices, ebitda will be impaired...so unless you know when/how those covs are affected, please do not invest (short or long) in this stock. Its too risky and there are plenty of other cheap investments without the balance sheet risk.

Chesapeake Energy: Back from the Dead

that would be great if someone elaborated on their debt covenants and when/if they can be triggered at lower ebitda/debt ratios and figure out what nat gas prices would be consistent with those ratios. If you can't do that, don't touch this stock.

No positions

Chesapeake: When Gas Prices Will Recover

"Barclays: US gas needs to go below $4 to balance oversupplied market"

www.platts.com/Natural...

Chesapeake: When Gas Prices Will Recover

Great rationale, weiwentg. this site needs more of this sober analysis. commodities are a completely random variable. all a conservative investor can do is buy a business that can thrive no matter what the price -- Be it $2nat gas or $12 nat gas. CHK used to be able to do that until their capital structure recently became prohibitave. This is, again, where mcclendon's ideologue-mentatlity ("nat gas will never go to $2") has seriously jeoprodized its long-term prospects. Yes they have lots of valuable real-estate...but this is precisely the worst time in history to attempt large-scale, premium-inclusive, monetization of large assets. I'd throw Rio Tinto in this bin, too.


On Dec 11 09:17 AM weiwentg wrote:

> It does sound to me like Aubrey has a handle on his company's financial
> situation and his hedge book. However, what worries me is that he
> seems to assume he can sell assets in every environment. He managed
> recent large sales to BP and Norsk Hydro in a very difficult environment,
> but that's not a reason to assume he can keep doing that. Remember
> what Charles Prince said about how Citi was still dancing?
>
> The comment about Aubrey being a buccaneer really did it for me.
> The guy is hyper-aggressive. I happen to think he has a high chance
> of making it big. That said, there's downside risk in that if natural
> gas gets under, say, $4 for an extended period, I can see a situation
> in which he drives the company into the ground (meaning it needs
> a highly dilutive capital injection or files bankruptcy). Sub $4
> natural gas is a bit of a doomsday scenario, but you can never tell
> what commodity prices will do.

Energy Roundup: Chesapeake Changes Its Plans

via morningstar:

"Under a low scenario of long-term natural gas prices of $5, we believe Chesapeake is worth around $8. In this hypothetical low case, we expect production growth and capital spending to drop considerably and costs to moderate. We also think that the firm's projects in Appalachia, Fayetteville, and Haynesville would become top priority given their superior economics. In a high side case of long-run natural gas prices $10, we anticipate that growth would kick into high gear, with cost inflation to follow. Under this scenario, Chesapeake is worth around $145."

I'd rather buy a lottery ticket.

Chesapeake: When Gas Prices Will Recover

Other famous ideologues - Bernie Ebbers, John Mackey, Jeff Skilling...all lived in a perpetual state of denial. The reason why everybody likes them so much is simultaneously why they shouldn't be liked and their stocks should be avoided.

Energy Roundup: Chesapeake Changes Its Plans

What happens to CHK if nat gas prices go to $4?

$3?

If you can't answer those questions, you shouldn't be investing around CHK.