maz

Raising Chesapeake Energy's Intrinsic Value Estimates

Although Haynesville is likely very good news for CHK I'd classify Davy's valuation as a guesstimate at this stage & certainly wouldn't take a $75 to $100 valuation to the bank. There is simply too much information missing

* It relies on NG remaining in the $8 to $10 range yet that much increase in supply may negatively effect price.

* We have no idea how much lease costs will be to expand from 200,000 to 500,000 acres but we do know that they'll be high as everyone & his dog knows the play

* There's no guarantee that pull costs will be similar to Barnett

* Lastly & perhaps most important we have no idea how much dilution and/or increased debt we will have to take on to get to the vast increases in proven reserves. What we do know is that it's highly unlikely that the latest dilution is the last - we've been this route before.

Morningstar has a more conservative $59 valuation - which may prove low in the end but imo is prudent for the time being