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$58.78 1.68 (2.94%)
5/16/2008 4:00 PM

Chesapeake Energy Corp (CHK)

CAPS Rating:
*****

An oil and natural gas exploration and production company engaged in the acquisition, exploration and development of properties for the production of crude oil and natural gas from underground reservoirs and the marketing of natural gas and oil.

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Recs

15

Avatar CJIII (93.74) Submitted: 2/05/08 8:58 AM : Outperform Start Price: $37.37 CHK Score: 52.33

Natural gas is/will increase in importance as oil prices increase and access to LNG and Canadian Natureal gas decrease. CHK has large and growing reserves and has transitioned from a company focused on resource capture to resource explotation.

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Avatar Cuchulainn1 (98.61) Submitted: 4/09/08 1:01 PM

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Intrinsic value of $75= buy, buy, buy.

http://seekingalpha.com/article/71414-raising-chesapeake-energy-s-intrinsic-value-estimates#comment_form


Risk=Share dilution, and overly aggressive production strategy.

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Avatar Cuchulainn1 (98.61) Submitted: 4/11/08 2:40 PM

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Should also mention for those who are new to nat gas stocks. NatGas stocks have a whats called a "shoulder". In short NatGas companies typically pullback a little in the summer when demand for heating drops. Makes sense right? Just look at a five year chart of CHK and you will see what I am talking about.

Under $48 right now which is not a bad price. But if history is any indicator you may be able to get this one cheaper in July/August. Buying now or latter. Either way I am long term bullish on NatGas. Although I think EOG may be a safer play since they are more frugal. CHK, on the other hand, appears to be going all out in expansion and I am concerned that they may get sloppy. (or it could pay off big for them)


EOG: http://www.fool.com/investing/value/2008/02/08/one-exceptional-explorer.aspx

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Avatar Cuchulainn1 (98.61) Submitted: 5/08/08 4:27 PM

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For what it's worth McClendon calculates CHK is worth 100 a share. The calculations of $75 a share is using very conservative estimates. McClendon has put his money where his mouth is buying $100 million of his own stock.

I was concerned that CHK was going to get sloppy and drill wells faster than they could bring them online. I didn't see any evidence of that being a major problem in the conference call or the earnings. Furthermore when you listen to the conference call McClendon flat out states that the stock market is undervaluing CHK's current leases by a factor of 7x.

I have been skeptical of CHK and concerned about their rapid expansion plans and dilution of shareholder value. I also believed Boone Pickens when he said NG would trade between $8-$10 up from the usual $6-$8. Currently NG is at $11.222 and climbing, Cramer says it will go to $16. We haven't seen the spring and summer drop in NG like most years.

Basically I am saying I called this one wrong. I have been bullish on the NG sector, but hesitant on CHK. This stock appears be a good investment on any pullback and more likely than not will go to at least 75 if not to 100.


disclosure: I am long Chesapeake.

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Avatar bluedome (89.76) Submitted: 5/14/08 5:36 PM

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Why is no one mentioning that they lost money last quarter, and are selling at
30 times earnings (good earnings).

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Avatar Cuchulainn1 (98.61) Submitted: 5/16/08 10:54 AM

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Bluedome, give this a read: http://www.fool.com/investing/value/2008/05/05/the-chesapeake-express-keeps-rolling.aspx

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