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Why I'm watching CHK

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April 26, 2012 – Comments (13) | RELATED TICKERS: CHK

I don't really know much about CHK. I know it is involved in NG and oil (mostly NG).  I know it is generally seen as a leader in its field.  Not sure why, because I don't know how to analyze oil and gas companies. What I do know is they have a piece of crap CEO.   However, the stock is very cheap, and beats earnings often.  I think for the short term there will be nothing but bad news flow.  Funds forced to sell it, SEC probes, other people saying what kind of messed up stuff he has done, etc.  This will all beat the stock down heavily.  It's already down over 20% since the scandal broke out.  If it drops another 10-15%, to a total of 35% all based on the scandal, I will watch for a catalyst.   Maybe the board will get rid of him.  Maybe his pay will be restricted.  Let us not forget what he did, didn't negatively impact earnings, it was just stupid.  if there is a move made that would severely reduce the chance of him screwing the company in the future, then most if not all of that 35% would jump back over time.

Well, anyway, I think it is worth keeping an eye on.  What do you think?

13 Comments – Post Your Own

#1) On April 26, 2012 at 5:22 PM, mbates50 (< 20) wrote:

As Warren Buffett says. "don't invest in things you don't understand"

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#2) On April 26, 2012 at 6:09 PM, Option1307 (29.70) wrote:

The basic premise is that not only did he have some shady loans from the company but that he also leveraged CHK beyond belief in an effort to acquire land deals etc.

So the question isn't just how shady of a person is the CEO, but did he set up CHK for serious financial risk with the high debt and leverage?

I agree that CHK is something to keep and eye on and depending how low it goes from this scandal it may be worth grabbing a few shares, but just realize that there is more to the story then just a stupid CEO using the comapny as his personal piggy bank.

+1.

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#3) On April 26, 2012 at 6:18 PM, Valyooo (99.40) wrote:

Yeah, i know that, but I'm ok with leverage if they can keep earnings positive even in a bad Ng environment 

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#4) On April 26, 2012 at 8:14 PM, HarryCarysGhost (99.69) wrote:

I'll pass, sounds like trying to catch a falling knife.

Been there, done that, not gonna do it again.

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#5) On April 26, 2012 at 10:17 PM, Imperial1964 (97.75) wrote:

I won't invest until they oust the CEO.

If you do invest, CHK is only for if you're very bullish on natural gas.  They are the most aggressive company in the business, as was mentioned about the leverage.

But if I were looking to be aggressive in the natural gas sector, I would also look at drillers too.

Right now, I'm not sure what catalyst would start a rise in the natural gas market.  I'm not saying prices will remain depressed forever, because they won't.  I just don't know in what timeframe a turnaround would come.

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#6) On April 27, 2012 at 7:55 AM, lemoneater (79.39) wrote:

My natural gas play is SE a NG pipeline company that was spun off from Duke Power. I'm happy with the generous dividend and the almost 30% share price appreciation from when I bought it.

With the CHK the challenge is to know how fall it can fall. I assume the CEO is not the only leader at the company that is less than ethical. The term "loose cannon" comes to mind.

Good to read your blogs, Valyooo. Have a great weekend! I'm going camping at Black Mountain, NC one of my favorite spots. 

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#7) On April 27, 2012 at 10:27 AM, Schmacko (66.96) wrote:

Aubrey McClendon is the CEO of CHK AND Chairman of the board.  He's not going to oust himself.  The SEC is going to investigate him for his borrowing practices, but they are a largely toothless organization. 

The company is shady and I expect it to keep on being so as long as McClendon is there.

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#8) On April 27, 2012 at 12:17 PM, Valyooo (99.40) wrote:

Have fun lemoneater, I am jealous, I love to hike and I haven't done it in 6 months

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#9) On April 27, 2012 at 1:18 PM, JakilaTheHun (99.94) wrote:

Encana (ECA) is a better option to play natural gas, IMO.

 

Admittedly, I'm long on CHK, as well, but my position in ECA is much larger.  If I were to only buy one, I'd pick ECA without much question. 

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#10) On April 27, 2012 at 2:13 PM, lemoneater (79.39) wrote:

Thanks, Valyooo, I will :) I'm feeling great today and we should have good weather for camping.

Hope you get to go on a hike in not too long.

Enjoyed the natty gas topic.Take Care!

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#11) On April 27, 2012 at 2:17 PM, racksonracks (31.86) wrote:

Regarding CHK long, how do you all feel about CHKM instead?

 CHKM for the LP and higher dividend.

 

Thoughts?

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#12) On April 27, 2012 at 3:25 PM, Mega (99.95) wrote:

The problem with CHK is they spend more energy doing land deals and financing than actually drilling profitable wells.

Compare MCF up 1500% in the last decade (without using debt!) with CHK up 120%.  I'd rather buy MCF, Ken Peak has a fantastic track record.

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#13) On April 27, 2012 at 4:26 PM, Momentum21 (93.24) wrote:

These guys have at least 2 strikes against them. I would want to see how the accounting looks after the next earnings call...my guess is that they might not look as cheap after they start unraveling the creative deals that the CEO had a piece of...

CHK doesn't fall into the "over-reaction" category to me. I think it is going to be many months before the coast is clear and there are other ways to play NG...CJES is an angle that I am taking.

Also note the point by MegaShort in #12.  

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