BrotherMaynard

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.

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.