Chesapeake Energy Corp (NYSE:CHK)

CAPS Rating: 4 out of 5

Chesapeake Energy is a leading producer of natural gas, a heavy producer of oil and natural gas liquids, and a very active driller of new U.S. wells.

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Player Avatar Manxome (22.89) Submitted: 1/5/2009 1:17:21 PM : Underperform Start Price: $16.03 CHK Score: +79.62

When I lived in Oklahoma City 10 years ago I had never heard the name Chesapeake. Went home for Christmas and now their name is everywhere. Fancy campuses, company apartments, rowing clubhouse. They top the donor list on all charitable/cultural events. Friends that work there talk about their team growing from 3 to 50 in a few years.

In short, they grew like, and throw money around like one of the high-flying tech companies during the tech boom. But this is not a new industry that typically supports this kind of amazing growth. Nat gas is pretty mature, has been around a while. Of the employees I asked about it, they all loved the company, but had no idea how it had achieved its growth story.

So my BSometer is going off pretty strongly here. Could be that I am off-base, but I would advise anyone looking to invest to make sure they fully understand where the money is coming from.

Their balance sheet is pretty ugly, which is probably part of the story. Fund amazing growth via debt. It's possible that financing their way towards control of nat gas market will pay off for them if nat gas takes off, but it would appear that they are staking their business on it.

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Member Avatar LWILLS (54.32) Submitted: 11/30/2011 10:38:45 AM
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Interesting - I appreciate your comment. I have a thumbs up on this stock, but really am getting antsy about their debt and the apparent flakiness of their leader. Your insight is helpful.

Member Avatar kmacattack (48.91) Submitted: 12/19/2011 3:13:24 PM
Recs: 3

I don't know if you noticed or not, but Manxome's post was dated 1/15/2009, with a start price for CHK at $17.78, about $5.00 below the current price in the mid $22 range. I don't understand how his/her CHK score is a POSITIVE $6.30 since his/her call was that the stock was going DOWN in price. Since his/her call, CHK reached almost $36 per share, and there is only one reason that the stock isn't trading above $50 today. The energy bill, which passed the House of Representatives with almost 300 BI-PARTISAN VOTES (Remember when, a couple of years ago, before one political party decided to place the interests of their PARTY above the interests of OUR COUNTRY?) was debated and delayed in the Senate until August of 2010. The energy bill AKA the American Power Act, was widely hailed as the best piece of legislation to be crafted in nearly 50 years. The energy bill was written by a bi-partisan group of strange bedfellows, including Sen. John Kerry and his arch rival T. Boone Pickens, who, along with Chesapeake's Chairman, Aubrey McClendon, swung the election of 2004 to "W" Bush by funding an illegal, election eve " Swift boat Documentary" on 149 TAFT BROADCASTING stations in Ohio in an effort to make Vietnam War Hero, Silver Star and Triple Purple Heart recipient John Kerry look like a traitor, questioning the validity of his Silver Star and even his Purple Heart medals. Kerry had no time to respond to the attack ads and therefore they were a violation of Federal Election Law. Neither T. Boone Pickens nor McClendon ever served in the military-their interests were financial, in line with the 85 percent of the oil and gas "campaign contributions" which are given to republican candidates clear down to the state and even local level. John Kerry earned more respect from me on his willingness to work with Pickens the last two years in crafting a bill which wouldn't help Massachusetts or Kerry personally, but could make billionaire Pickens a lot richer. This bill was written with the goal of ending America's dependence on OPEC oil which accounts for nearly HALF OF OUR TRADE DEFICIT,and makes us militarily, diplomatically, and economically weaker in the world.
The energy bill was a "Manhatttan-like" project which would promote virtually every form of alternative energy in order to make our country energy self sufficient once again. The centerpiece of the bill was the Pickens Plan, which would convert the nation's long haul trucking fleet from dirty burning diesel fuel to Compressed or Liquid Natural Gas, which is a 100 percent American produced energy source. This one facet of the energy bill would cut our foreign oil imports IN HALF within 5 YEARS, which would place $3 TRILLION DOLLARS back in the pockets of American consumers that is now being sent directly to OPEC bank accounts in the Mideast.Can you imagine the economic impact that $3 trillion in additional disposable income would add to our economy? Just look at the effects of $5.50 gasoline in 2007 and 2008, because trillions in disposable income were sucked up by high gas prices, leaving much of the middle class and poor with no money to spend on anything. Energy prices started the snowball that had the country headed for a depression, but due to $1 billion in "campaign contributions" which morphed into TRILLIONS OF DOLLARS in profits to Big Oil companies, The refinery owning Koch brothers, and others who want to see this nation continue to be dependent on their STRANGLEHOLD MONOPOLY. Historically, when Big Oil is getting rich, Americans are going broke at the same time.
About a month ago, I was in Oklahoma City and noticed that CNG fuel was selling for $1.29 per gallon equivalent, compared to Diesel's price of $3.75. The average long haul trucker would save about $1,000 PER WEEK by using CNG as a fuel source.. The country would benefit tremendously because shipping costs would be drastically reduced for EVERY ITEM BOUGHT AND SOLD IN THIS COUNTRY. American manufacturers would gain a competitive edge by being able to ship their products from the plant to an export port for far less money. The environment would get a huge break as well, since CNG emits no sulfur and only 1/4 of the POISON GAS CO 2 versus diesel. This is the reason why most natural gas producers support "cap and trade" and the Koch brothers and every Big Oil company and the coal lobby oppose cap and trade. Chesapeake offset all their carbon tax liability by planting carbon eating tree farms, which can be extremely profitable, and can be planted on lands which they own or lease. Anyone who thinks that environmental laws don't help should examine pictures of Los Angeles taken from the mountains to the east about 40 years ago. The city was engulfed in a thick brown cloud much of the time, and hundreds of thousands of people suffered from respiratory related ailments. Today, with a population which is far greater, the air is much cleaner and the air is much healthier. If the hundreds of thousands of trucks operating in the city every day were running on CNG, the air would be far cleaner still.
One senator, Sen. Mitch McConnell, single handedly blocked the energy bill which 85 percent of Americans supported. Why would he do this? It could be related to the fact that he had recently received a $500,000 "campaign contribution" from Big Oil lobbyists, and another $50,000 from the coal lobby, both of which will do anything to make sure that they be allowed to steal all that the law will allow, and apparently $1 Billion in "campaign contributions" has earned these crooks a "Get out of jail free" card.
Now for some good news. Chesapeake has done something that will do far more good than all their civic donations 10,000 times over. They are committing $300 million to Clean Energy Fuels Corp which will entirely pay for the build out of CNG and LNG fill stations from coast to coast The genie is now out of the bottle, and big oil can't stop it. It would help tremendously if congress were to guarantee low interest loans to truckers to convert to CNG, but this would involve betraying the "constituents" (the top 2 percent who supply 95 percent of the campaign "contributions", so I don't expect that to happen. . The cost is now about $40,000, half what it was two years ago and will go lower with the "economy of scale" factor, so an independent trucker would be crazy not to convert to CNG as soon as the fill stations are operating on his normal routes. Look for Wal Mart and other huge fleet operators to jump on board quickly, since shipping costs are a huge factor in any retailers pricing and profit structure. As soon as some of the major transportation Interstates (I-40, I-70- I-20, I- 10) have reached completion of the fuel station build out, I look for Natural gas prices to move upward because the huge glut of oversupply will be diminished by increased demand. When natural gas prices were 4 times the current level, about $12 per MCF, CNG was still selling for about 1/3 the price of diesel, and even if Natural Gas and Diesel pricing were equal, the benefits to our country would be huge versus continued dependence on OPEC and their business partners in Big Oil. I haven't agreed with a lot of things Aubrey McClendon or Chesapeake have done over the past few years, but in this case, they have done truly something which will not only benefit Chesapeake employees and shareholders, but every citizen of this country as well.

Member Avatar facevalue22 (< 20) Submitted: 2/16/2012 10:50:29 AM
Recs: 0

Wow, I dont pay much attention or invest a lot but I am sure glad people like you are out there to inform people of critical information like this. This is very impressive article. GREAT JOB!!!! I will invest.

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