Chesapeake Energy Corp (CHK)

[LouisDesyjr]

Up 21% on buyout article

Apparently, the reason given for the surge in price is a seekingalpha article that speculated on the possibility of a buyout:
http://seekingalpha.com/article/3916446-chesapeake-energy-prime-takeout-candidate

The author even started off the article with a bullet point of:

Chesapeake Bankruptcy Fears unfounded

plus added that he though oil prices would stabilize and save them.

I think the author is mistaken about the magnitude of the losses with CHK. Oil and gas prices are still too low, the winter in the Northeast was very mild this year (I am in Worcester, MA; Christmas day was almost 50, and today was almost 50. We have had very little snow this year and only a few weeks of typical winter cold weather. I am expecting no snow after March 1.) plus oil and gas storage is expected to fill up around June/July 2016.

The idea that anyone with money would want to buy CHK, assume the $10B in debt on assets that are generating large losses is incredible. Unless oil and gas prices rise, there is no way CHK can avoid bankruptcy. At some point, its cash will run out and the bank line of credit will be drawn down 100%.

I am expecting the earnings release on Feb 24 to be a disaster with write offs of $4B or $5B, like the prior two quarters.

Louis J. Desy Jr.