Romans518_1132

Chesapeake Energy Corp. Q1 2008 Earnings Call Transcript

My (very non-expert) comment/question regards a comment Mr. McClendon made on pg. 4:

"Yeah, Michael its -- you may not have noticed this yet, but on the bottom of the page 19 in our outlook -- and on top of page 20. We did highlight that we plan to sell additional properties in 2009 and 2010 and we included in there, the word undeveloped leasehold. So, we think its very reasonable to consider that not only do we like to sell proved reserves or lets call it, $6 an mcfe and $6.50 and make them -- make new ones at $2 to $2.50. I think it's also reasonable to be early to some of this plays and buy acreage to the extent that turnaround and sell some of it at 5,10, 15 times X and so I think we'll continue to do that."

My question -- Are we to understand that ALL OF CHK's proved reserves of 11.5 tcfe currently sell for an average of about $6.25 an mcfe? If so, this equals $72B! If we conservatively assume that the proved reserves represent half of CHK's total value, then CHK is conservatively worth $144B, or $280/share. I know CHK's outlooks and presentations have historically been very conservative, and I know that the value of its 14M acres has been skyrocketing, but this >80% undervaluation seems a bit much. Or maybe I'm missing something obvious ... any comments would be welcome!