CT Programmer

Chesapeake Energy Pre-Call Notes: Another Quarter, Another Beat

I've always been confused about CHK. They've actually lost money in both of the last two quarters because of "hedging". I'm no expert on hedging, but I always thought it was used to limit your downside risk and the tradeoff was limited upside potential. So how are they losing money then because of this? Also, if they are so big and so great, why is their dividend a paltry 0.64%? XTO is 1.04%, and even that pales compared to COP at 2.34% (I know COP is both gas and oil). Not that I don't like Chesapeake. I bought them back in February for $45 and had the sense to push the sell button at $63 at the start of the oil selloff early July (a lesson I learned from Gold earlier this year). I started looking again when they got below $50, but XTO just seemed such a better bargain (as far as fwd PE) and their dividend is twice CHK's. CHK's fwd PE has ranged anywhere from about 14 to the current 28, which I don't think is such a bargain. So I bought XTO. I'm not knocking CHK. Everyone is bullish in general on CHK, and I'm definitely bullish on gas for the next decade. But when everyone is going on about how great any given company is, that's usually when my internal warning lights start blinking.