Alamo

Chesapeake: When Gas Prices Will Recover

After carefully reading the CHK Conference call for Q3 '08, I came away satisfied that Chesapeake management has a handle on future developments whether or not, natural gas prices rise or fall. Considering that these comments were made in a highly uncertain economic climate Aubrey McClendon's team has hedged major percentages of 2009 and 2010 reserves at attractive prices. (75% in '09, 50% in'10)

Those hedges should be entirely sufficient to carry CHK profitably forward during the economic uncertainty going forward. Bottom line is the uncontrovertible fact that Aubrey McClendon has acquired very valuable undeveloped reserves and negotiated deals with companies that wanted a percentage of access to those properties. With the hefty cost involved in developing gas reserves I think it makes perfectly good business sense in sharing those costs while retaining half (or more) of the production when it does come on line.

The trick is "being firstest with the mostest", and when it comes to American unconventional natural gas reserves Chesapeake is at the top of their game. CHK and McClendon didn't become the top natural gas producer in the US by being stupid.