Lots of investors holding off on CHK hoping the price will dip before the start of Thursday's OPEC meeting. This might be a good idea and it might not because a lot of investors are waiting for the dip to get in.
I thought about it long and hard and decided to ride it out. If it dips, it will return back in a few days.
There's the good and the bad about Chesapeake. But after the beating the stock has taken, all the bad and then some has been priced in.
Audrey McClendon destroyed this company with his wheeling and dealing. Poor old Audrey is 10 toes up now so the worst is over.
Carl Icahn is now Chesapeakes major shareholder with 72 million shares and 2-3 seats on the board. The drop in oil, gas, and commodities have hit Icahn particularly hard, slamming his holdings in companies like Chesapeake Energy and Freeport McRoRan. But Icahn continues with his bets because he knows as I do that both companies will soon bounce back.
Price is not an issue with Icahn. He's worth 17 $billion and would dump Chesapeake in heart beat if he thought it was loser.
Carl is also a friend of Donald Trump. He bailed out Trump's Atlantic City’s Taj Mahal casino and is a strong supporter. He has Trump's respect.
Here's an interesting point: An investment fund run by Icahn has a net short position on the market; yet, he holds onto 72 million Chesapeake shares. He could and would sell or short Chesapeake if it made any sense.
On NatGas... June’s contract expired on Thursday at $1.963/mmBtu, a new one-month low. The new July contract pushed front-month prices back up to $2.169 per million British thermal units toward a four-month high as it has become the nearest-term contract. August is $2.28, September is $2.34, October is $2.44, November is $2.66, December is $2.96, and January 2017 is $3.09! This explains why my target price for January is $10.00 per share.
Of course, if gas goes up or down, then my target price will also move up and down.
Everything will hinge on how much supply is still in storage starting in December. If we get the hot summer that everyone is forecasting, then storage will drop like a heavy stone.
I do not believe that supply can keep up with demand because the drilling rigs needed to drill the long horizontal holes are in short supply. Drillers cut to the bone. They salvaged parts from stacked rigs and cut way back on maintenance. It's gonna take at least a year before enough rigs are available. Besides, few producers have any money to increase production and the banks are sour of extending credit. We could very easily see NatGas at $4 MMBtu in which case CHK will surely hit $10.
With record-breaking summer heat, Mexico's demand could be up 8%, and US demand up 15%. Humidity will be high due to La Nino and people will be roasting. La Nino will also move the southern Jet Stream north which will allow far more hurricanes to enter the GOM. This could disrupt production and show a spike in prices.
The new wide Panama Canal is scheduled to open in July. This will give LNG a boost because shipping cost to Asia will be cut by 40%. The LNG business is not going to disappear because contracts are already signed.
