Announcement

Collapse
No announcement yet.

Chessapeak

Collapse
X
  • Filter
  • Time
  • Show
Clear All
new posts

  • #46
    Chesapeake is expensive at 10.2 times estimated 2012 earnings before interest, taxes, depreciation and amortization (Ebitda), presuming $80 per barrel of oil and $4.00 per million cubic feet of natural gas. That compares to large-cap competitors’ multiples of about 6 times. At current rate of spending they will outrun cash flow sometime next yr.

    Comment


    • #47
      If Chesapeake goes down it will take the rest of the gassers down with it. Natural gas is a boom bust industry and so far the producers haven't busted yet thanks to easy financing and oil.

      Comment


      • #48
        Chesapeake Energy Corp said today that it expects to bring about $13 billion in cash next year through operating cash flow and future deals. enough to cover its capex and pay off debt.

        Comment


        • #49
          Wells Fargo on CHK
          November 17, 2011
          Equity Research
          Chesapeake Energy Corporation
          CHK: Positive--Management Meeting--Favorable LT Risk/Reward
          • Thoughts/Takeaways: Positive. On Monday-Wednesday of this week (11/14-
          16), we visited institutional accounts with CHK management. In attendance was
          Mr. Jeff Mobley, SVP, Investor Relations and Research. Focus on meetings was
          on capital spend, Utica and longer-term corporate strategy. We continue to
          believe the longer-term (LT) risk/reward remains positive. Highlights included
          within this note.
          • 2012 Funding Snapshot. For 2012, our capex estimate is $10 billion, against
          $5.8 billion of operating cash flow, and another $5.5 billion of expected asset
          transaction (CHK number at $7 billion). Obviously some execution risk on
          transactions given current market conditions, but CHK has a number of levels
          and has flexibility within its divestment program. According to management,
          30/25 plan still on track for 2012YE.
          • Utica JV. As expected, lots of question surrounding deal structure, LOI, and
          general Utica background. More clarity on why LOI announced - details within.
          We are still looking for a December close.
          • Stock Thoughts. Thesis remains intact and remain confident in the significant
          value embedded in shares. Transition to liquids just reaching inflection point,
          and we believe that visibility, plus execution in asset sales, will close the
          discount. In recent weeks and months, we believe the Street has turned negative
          on CHK shares and feels like a crowded short. We take the other side and
          believe some patience will be rewarded.
          • Valuation: Based on our proforma 2012 model, our NAV for CHK is $46.55.
          On a multiple basis, CHK trading at 6.5x, versus large cap peers at 5.8x, but note
          that CHK is growing nearly twice as fast as peers at 15%/year. Like the longer
          risk/reward. Reiterate Outperform.
          Valuation Range: $38.00 to $42.00
          Our valuation range is based on our NAV estimate, which includes value for both
          proven and unproven reserves, as well as other net assets and liabilities. Our NAV
          estimate for CHK is $46.55. Risks to our valuation range include sustained material
          weakness in commodity prices as well as the risk of a rising cost structure due to
          the company's active acquisition strategy.
          Investment Thesis:
          Through an aggressive acquisition and development strategy, over the last few
          years Chesapeake has built itself into a dominant natural gas producer in the U.S.
          We believe the company's Utica position will be a driver of value for shares and
          believe that CHK has indeed made the transition to a more balanced portfolio.

          Comment


          • #50
            I don't follow CHK that closely. I know their assets are purported to be exceptional relative to their price, and a lot of very credible people here believe in them, so I have to respect that.

            However, can ANYONE here honestly tell me they have EVER seen a serious oil and gas company of this size do as many different "transactions" as CHK?

            Its amazing...every other week this guy has a new deal for a new change...and they are getting more and more complicated. That ought to raise alarm bells for holders of the stock. If you own it, and you can explain WHY its neccesary, or advantageous, to do all these deals, and make them so complex, than you should feel ok with it.

            Either way, Aubrey is either a hell of a lot smarter than everyone else in the business, or getting real desperate, because he's doing a whole lotta movin and shaking and re-orging and wheeling-dealing.

            Either he's setting up the company for one great ride, or he's trying to stop the debt wheels from falling off.

            Comment


            • #51
              CHK is 99% of the problem in the gas market today. NG won't see any recovery until companies like CHK are dead.

              Comment


              • #52
                Investing RULES to never forget!!

                1. When the accounting problems get reported - RUN!
                2. When they discover the CEO been dipping in the kitty - RUN!
                3. When the analysts start using the word SCHEME to describe a situation - RUN!
                4. When 10 times average volume happens on a 10% down day - RUN!
                5. When you smell smoke - make sure that BEFORE the fire starts you - RUN!
                6. When the BOD ignores the "Scheme" - RUN!
                7. If it sounds like a duck, walks like a .... - RUN!
                8. If it looks like a scheme they pulled BEFORE - RUN!
                9. When they start talking about cash flow shortage - RUN!
                10. And if the CEO has a girls name - RUN!

                Comment


                • #53
                  Originally posted by DMOSHER View Post
                  CHK is 99% of the problem in the gas market today. NG won't see any recovery until companies like CHK are dead.
                  Not that CHK is not a problem, but the passive length in the Index funds is the real problem.

                  Comment


                  • #54
                    Aubrey being sued by a shareholder over his undisclosed loans. Should be interesting. He'll probably have declared bankruptcy by the time it gets to court. Can't wait to see his story on "American Greed"

                    Comment


                    • #55
                      The sooner the E&Ps like CHK get eaten, the sooner this low price mess will end.

                      Comment


                      • #56
                        I thought this was a well writen post I pulled off the yahoo CHK board......

                        What’s Wrong With Chesapeake’s FWPP
                        A media fury has exploded regarding Chesapeake CEO Aubrey McClendon’s participation in the company’s Founder’s Well Participation Program, or FWPP for short. This is an executive perk that has been in place for almost all of the company’s 23 year existence, but has recently sparked controversy due to the fact that Mr. McClendon has been borrowing against his interest in the FWPP. In this commentary, I will attempt to explain the FWPP, and why I believe that Mr. McClendon’s participation in the FWPP does in fact present a conflict of interest between Mr. McClendon and Chesapeake’s shareholders, and the public in general.
                        In a nutshell, the FWPP allows Mr. McClendon to purchase a 2.5% interest in the production value of every well that Chesapeake drills. His cost for that participation is 2.5% of the drilling, completion, and ongoing production costs associated with each well. Also note that this is an all or none deal. If he participates in one well, he must participate in every well that the company drills, whether it is a dry hole or not. The company maintains that this program aligns Mr. McClendon’s interests with the company’s interests. Sounds fair, right? But, as everyone knows, there are a lot more costs associated with each well besides those mentioned above. There are the costs of the leases themselves, which can amount to thousands of dollars per acre, not to mention all of the associated overhead, such as corporate operating expenses (salaries, benefits, advertising, marketing, R&D, and so on). Mr. McClendon bears none of these expenses.
                        OK, so what’s the problem, one might ask. It’s been working pretty well so far, and the FWPP has been explained in detail in all of Chesapeake’s proxy statements and filings with the SEC. The problem is that Mr. McClendon has been borrowing against his earnings potential in these wells, and borrowing big, up to $1.1 billion has been reported. He also reportedly has been tapping some of the same capital markets that Chesapeake itself uses to meet its capital requirements.
                        Natural gas prices are extremely low right now, around $2 per MCF. This means that the value of current production is extremely low, and even though the company has a significant percentage of its production hedged at prices higher than $2, it appears that they are having liquidity problems as they are selling off assets left and right. Additionally, the company currently is highly leveraged with around $13.3 billion in long term debt and other long term liabilities, which equates to a debt to equity ratio of about 80% (Exxon Mobil, by contrast, has a debt to equity ratio of around 20%, BP is around 35%). Mr. McClendon must also facing cash flow problems, otherwise, why would he be borrowing so heavily against his interest in Chesapeake’s wells.

                        And therein lies the problem, where Mr. McClendon’s interests are clearly not aligned with the company’s. It all comes down to a question of cash flow. The company needs to generate enough cash flow to fund its operations and meet its debt obligations, as does Mr. McClendon. The problem is that there are clearly two different business models at play here. The company must pay all of the costs associated with producing natural gas, including the overhead, whereas Mr. McClendon must only pay for the drilling, completion and production costs. The profit margin percentages generated from these two models are vastly different. Therefore, a lender, often the same lender in this case, could be reasonably expected to charge a different interest rate based on the potential profit and the associated risks with such a loan. Therefore, Mr. McClendon is competing against his own company for those capital dollars, with a built in advantage due to the different business structure. The company does state that they have a superior interest in Mr. McClendon’s ownership in the wells, but I seriously doubt if that would stand up in court in the event of any shareholder legal action, of which there appear to be several pending.
                        Even if Mr. McClendon were not to default on any of these loans, the potential for a damaging conflict still exists. For example, a company with a strong balance sheet (low debt, high cash balance) is much better positioned to ride out a storm in which prices for its products are severely depressed. Unfortunately, neither Mr. McClendon nor Chesapeake has a strong balance sheet. Mr. McClendon’s $1.1 billion is personal debt is also about equal to his estimated net worth; there’s that 100% debt to equity ratio again. So, while it might be a better business decision for Chesapeake to shut in its production, minimize overhead, and wait for a better market for its products, Mr. McClendon clearly is not in a position to do the same thing. He has interest payments to make, and he is not about to default on those loans as it would wipe him out financially, not to mention the damage to his ego and image. So the only option he has is to keep drilling, and more important, keep producing. Remember, he only generates revenue based on what a well produces, not on its value in the ground. And it is this need to keep producing to serve his own interests, when that same production activity is clearly not in the company’s best interest that is the heart of the conflict.
                        So what to do now? I still believe that Mr. McClendon is a tremendous value to the company. His ability to find and produce natural gas is unparelled in the industry. However, what cannot continue is the lack of fiscal responsibility. The company needs a board of directors that will keep Mr. McClendon in check, and make sure that the company’s interests, and therefore the shareholder’s interests, are always paramount. The FWPP either needs to be terminated, or at least modified to reflect a business model that matches the company’s; one where Mr. McClendon shares in all of the company’s expenses, not just those that benefit him. Finding a way to terminate this program without bankrupting Mr. McClendon is going to be tough, and frankly, I’ve thought about it and I don’t know if it can be done. I also don’t think the shareholders will sit for another CEO bailout. I guess the question is, can the company live without him? As always, time will tell.

                        Comment


                        • #57
                          Two important points from CHK 1st quarter 2012 results:


                          1. Natural gas production was flat from prior quarter to this quarter in bcf terms.

                          2012 First Quarter Average Daily Total Production of 3.658 Bcfe per Day Increases 18% Year over Year and 2% Sequentially, Despite Voluntary Net Natural Gas Curtailments of 30 Bcf (54 Bcf Gross) during February and March; 2012 First Quarter Daily Liquids Production Increases 69% Year over Year and 7% Sequentially to 113,600 Bbls per Day; Liquids Production Reaches 19% of Total Production and 61% of Unhedged Natural Gas and Liquids Revenue.

                          2. They have zero production hedged for rest of 2012 and 2013.

                          Company Provides Update on Hedging Positions

                          The following table summarizes Chesapeakeís 2012 and 2013 open swap positions as of May 1, 2012. Depending on changes in natural gas and oil futures markets and managementís view of underlying natural gas and liquids supply and demand trends, Chesapeake may increase or decrease some or all of its hedging positions at any time in the future without notice.

                          Table is attached.


                          Can view full details at http://www.chk.com/news/articles/Pages/1689968.aspx
                          Attached Files

                          Comment


                          • #58
                            *DJ Chesapeake Energy CEO Ran $200M Hedge Fund -Reuters >CHK

                            Comment


                            • #59
                              Originally posted by PAPA ROACH View Post
                              *DJ Chesapeake Energy CEO Ran $200M Hedge Fund -Reuters >CHK
                              This just gets better and better. If he made long bets on the NG market just prior to his Jan 23. BS announcement, he is definitely going to jail. This man needs to have his third testicle removed.

                              Comment


                              • #60
                                Very interesting article via Reuters on CHK CEO. I would say he is in much trouble and
                                watch SEC investestigation coming soon to fruition. Anyone with a Put in CHK is a good
                                bet imo.

                                Comment

                                Working...
                                X